KUALA LUMPUR, Sept. 2 (Xinhua) -- The Malaysian government announced a price hike on petrol and diesel on Monday, in an effort to consolidate the public finance and cut deficit.
Prime Minister Najib Razak said RON 95 petrol will be priced at 2.10 ringgit per liter (0.64 U.S. dollars) and diesel will be priced at 2.00 ringgit (0.61 U.S. dollars) starting Tuesday, up 20 cent from 1.90 ringgit and 1.80 ringgit respectively.
He said Malaysia need to move to a more targeted subsidy system, noting that the rise in the commonly consumed RON 95 petrol and diesel would save 1.1 billion ringgit (340 million U.S. dollars).
Fuel price is heavily subsidized in Malaysian as Najib, who also holds the finance minister's portfolio, said his government has allocated a total of 24.8 billion ringgit (7.6 billion U.S. dollars) this year on fuel subsidies.
The price hike comes as the government try to control the public debt while continue economic growth in a weaker external environment. The central bank has cut the growth forecast to 4.5 to 5 percent for 2013 from the previous 5 to 6 percent.
Fitch slashed Malaysia's economic outlook to negative in July, warning against the country's rising debt and the lack of budgetary reform. According to the rating agency, the country's federal debt amounted to 53.3 percent of GDP by the end of 2012, just below the government target ceiling of 55 percent.
Najib told a press conference on Monday that his government is committed to cut the fiscal deficit to 3 percent by 2020.
A victory in the general election in May has provided Najib with new mandate for fiscal consolidation. A senior finance ministry officials said last week that the government will soon introduce the controversial goods and service tax (GST).