Additional RM100 cash aid barely enough, says economist

 

Three economists support the decision to do away with subsidies for bottled cooking oil, saying it is timely and the right thing to do.

GEORGE TOWN: An economist has taken the government to task for the RM100 increase in Bantuan Keluarga Malaysia (BKM) cash aid, aimed at helping those in the B40 overcome the rise in the cost of living.

Geoffrey Williams of the Malaysian University of Science and Technology said the RM100 was inadequate for those from B40 households to sustain themselves for months, especially with the prices of chicken, eggs and cooking oil set to rise after July 1.

Geoffrey Williams.

Williams said the ending of subsidies for bottled pure cooking oil was a good move, as the subsidy was not targeted at the B40 community initially.

However, he expected demand for cooking oil sold in 1kg polybags to rise after July 1, saying “even high-income consumers will choose the cheapest option”.

“This would only cause a shortage of (cooking oil in) polybags as producers will also just decant the oil from bottles to bags. It will not reduce the purchase of subsidised oil, or stop the abuse by commercial sellers and smugglers,” he said.

Yesterday, Prime Minister Ismail Sabri Yaakob announced an increase in the BKM cash aid, with the additional RM100 per household set to benefit an estimated 8.6 million people and four million households.

Ismail also said the government would discontinue subsidies for bottled pure cooking oil, as the subsidy had been abused by the commercial sector and smugglers.

The ceiling prices for chicken and eggs will also be removed after June 30, he said.

Yeah Kim Leng.

Another economist, Yeah Kim Leng of Sunway University, suggested that the government consider increasing the BKM amount over time, given the uncertainty of the adjustment of the prices of goods after the removal of subsidies and price controls.

“The government can provide the first increase, and then look at preparing for another increase in the event that food inflation is shown to be greater than expected,” he told FMT.

Yeah lauded the move to give targeted aid to the B40 community and to do away with subsidies and price controls, saying this was what economists had been advocating.

“It is a laudable move since we want to ensure that the market price reflects the supply and demand situation of certain industries.

“If you control the price of goods, you create market distortion or supply and demand mismatches that actually result in leakages, which is not sustainable,” he said.

‘Do away with blanket subsidies’

Barjoyai Bardai.

Barjoyai Bardai of Universiti Tun Abdul Razak called for the government to do away with blanket subsidies as a whole since it would lead to financial losses for the country.

He told FMT the government risked “eating itself” by giving out subsidies for the sake of earning public support since it would end up incurring a high amount of debt.

Barjoyai said Malaysia would lose its competitive edge and would end up nearer to bankruptcy like Sri Lanka, a country that is suffering from US$51 billion in external debt.

He also suggested that the government give food vouchers, saying this would help the B40 and M40 cope with increased prices of food after the removal of subsidies and price control. - FMT