07/07/2025

MONDAY | JULY 7, 2025

FOLLOW

ON TWITTER Malaysian Paper

6

@thesundaily

Govt on track in fiscal recalibration

Malaysian exports if Washington reimposes steep levies. However, the administration of US President Donald Trump has signalled a possibility of extending the suspension, a decision that could offer short-term relief to exporters, especially in the electrical and electronics, palm oil, rubber and machinery sectors. Economists say an extension would reflect a more measured US trade stance and could help stabilise global market sentiment, which is a respite for emerging economies navigating inflation, currency volatility and geopolitical factors. Ongoing tensions in the Middle East continue to fuel oil price fluctuations, adding pressure to Malaysian fuel subsidy rationalisation efforts. Global price volatility could increase consumer costs and complicate the implementation of subsidy reforms. While government fiscal reforms are geared towards long-term stability, public sentiment remains sensitive to cost of living issues. Uncertainty lingers over the implementation of RON95 fuel subsidy rationalisation and the impact of SST and electricity adjustments on consumer behaviour. Mohd Afzanizam said there may be room for monetary easing, including a potential 25 basis points cut in the overnight policy rate (OPR)

o Expanded SST, revised power tariffs designed to reduce impact on households and small businesses

PUTRAJAYA: As Malaysia enters the second half of 2025, the government’s fiscal recalibration through an expanded Sales and Service Tax (SST) and revised electricity tariffs marks a move to strengthen finances while prioritising public welfare. Despite concerns over rising living costs, the rollout includes measures designed to cushion the impact, especially for households and small businesses, Bernama reported. The government appears to be responding to public sentiment, from tax exemptions on personal care services such as facials and haircuts to anticipated cash assistance and an updated electricity tariff system in which individuals in the higher usage bracket are charged more. Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim announced tax exemptions on four imported fruits – apples, oranges, mandarin oranges and dates. He also raised the SST registration threshold for leasing and financial services from RM500,000 to RM1 million, offering relief to small businesses.

“This move helps maintain the affordability of food items and supports household purchasing power,” said Bank Muamalat Malaysia chief economist Dr Mohd Afzanizam Abdul Rashid. Another policy change taking effect this month is the revised electricity tariff, which affects more than 23.6 million domestic users in Peninsular Malaysia. The new rates, effective until Dec 31, 2027, fall under an incentive based regulation framework under Section 26 of the Electricity Supply Act 1990. The Energy Commission has set the average base tariff rate at 45.4 sen per kilowatt-hour, lower than the 45.62 sen approved in 2024. The adjustment is expected to reduce overall electricity costs while promoting energy-saving habits. Despite domestic reforms, global uncertainties continue to weigh on the local economic outlook. Mohd Afzanizam said the upcoming expiry of the United States’ temporary suspension of reciprocal tariffs on July 9 could increase pressure on

The new electricity rates taking effect this month cover more than 23 million domestic users and would lower bills while promoting energy-saving habits. – MASRY CHE ANI/THESUN

the same period last year. “Savings from the diesel subsidy rationalisation and SST reforms introduced in 2024 have opened up fiscal space, enabling the government to increase targeted assistance. “The combined allocation for Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah has been raised to RM13 billion this year from RM10 billion in 2024. “This balancing act is supporting investor confidence and helping to preserve Malaysia’s sovereign credit ratings,” he said.

as early as this month. In a separate move, Bank Negara Malaysia’s decision in May to reduce the statutory reserve requirement by 100 basis points injected about RM19 billion into the banking system, providing liquidity to support economic activity. “On the fiscal front, the government’s disciplined approach appears to be yielding results. The fiscal deficit narrowed to RM22 billion, or 4.5% of gross domestic product in the first quarter of 2025, down from RM26 billion, or 5.7% in

SUBSCRIBE TO theSun TODAY!

ONLY RM 1 PER COPY!

Enjoy daily access to:

The latest local & global news Top entertainment & sports stories All in 32 Full Colour pages

Stay informed 7 days a week! Just real news, straight to you.

SUBSCRIBE NOW!