Malaysia's government is to meet next week in a bid to slash subsidy spending that has more than doubled since 2006 and last year helped push the country to its biggest budget deficit in over 20 years.
The government of Prime Minister Najib Razak has promised to cut subsidies that cover a wide range of goods from petrol to electricity and cooking oil - key staples in this developing Southeast Asian country- but has backed down, fearing a backlash from voters.
According to official government figures, subsidy spending rose to 24.5 billion Malaysian ringgit ($7.49 billion) in 2009, 15.3 percent of total federal government spending, more than double the 10.1 billion it spent in 2006.
In a bid to push reform through and to win public support, Najib put former Malaysian Airlines Chief Executive Idris Jala in charge of a thinktank to come up with a comprehensive set of reforms.
"Some of the proposals by Idris Jala on rationalising the subsidies will be presented to cabinet on May 26," said a government source with direct knowledge of the matter.
"The next day, there will be a forum open to the public to discuss these subsidy proposals. All the cabinet ministers have been invited for this as well," he said.
It was not immediately clear which of the proposals from Idris' wide-ranging review will be discussed and investors are likely to wait for the proposals to be implemented before giving a vote of confidence in Malaysian assets.
"I think they have disappointed markets a few times already this year, so people will be a bit more cautious in reaction to this," said Alvin Liew, regional economist at Standard Chartered in Singapore.
Malaysian 5-year government bond yields were unchanged at 3.532 percent by 0515 GMT and the ringgit currency was trading at 3.32 to the dollar, slightly better than two month lows it hit on Wednesday.
Najib has pledged major economic reforms to boost growth and increase investment in Malaysia, which once led emerging Southeast Asia in investment flows but has now lost ground to Thailand and Indonesia.
ReutersLast Mod: 21 Mayıs 2010, 11:17