Reuters UK | KUALA LUMPUR, 01-Aug-2008 – Malaysia will implement a new petrol price formula from Sept. 1 that links retail prices to market levels, although it will maintain the current level of subsidies, Prime Minister Abdullah Ahmad Badawi said on Friday.
“After studying the issue carefully, the government would like to announce effective September 1, 2008, retail petrol prices will be aligned based on monthly market rates and subsidies will be maintained at 30 sen per litre,” Abdullah said in a statement.
Abdullah’s government has come under pressure since it cut petrol subsidies earlier this year and support for him has dropped to just 42 percent, according to a poll by the Merdeka Center for Opinion Research published on Friday.
The cut in subsidies won plaudits from economists as it reduced the strain on government finances. Before the cut subsidies accounted for a third of government spending.
Malaysia raised petrol prices by 41 percent and diesel by 63 percent on June 4 as part of a broad overhaul of the country’s energy pricing system aimed at cutting expensive subsidies.
Malaysia’s annual inflation rate hit a 27-year high of 7.7 percent in June and was likely to stay above 7 percent in July due to the impact of the fuel price hike, the government said this month.
Abdullah said that from next month, petrol prices would be determined on the first day of every month. At a time of falling crude oil prices, that would lead to reductions in the pump price. (Reporting by Niluksi Koswanage and Soo Ai Peng; Editing by David Chance and Alan Raybould)