Rafizi said the high subsidy costs were partly due to significant leakages in the system, notably in the case of diesel.

The leakage, he said, stemmed from the disparity between the subsidised and unsubsidised diesel prices, which certain industries and individuals had exploited.

“Now that diesel prices are artificially capped at the pump, what we are witnessing is people filling up their tanks with diesel at pump stations and then they sell it back to the industry,” he told reporters after launching World Bank’s Malaysia Economic Monitor October 2023 edition here today.

As such, Rafizi said the most effective way to reduce these leakages is to narrow the price gap between subsidised and unsubsidised diesel.

“You know there’s so much you can do to catch these people (who take advantage of the subsidy),” he said.

“The best way to stop leakages is to reduce the price discrepancy, so RM52 billion is actually small compared to what we will have to pay even more in the future.”

Rafizi was asked to comment on the 2022 Auditor-General’s Report which revealed that Putrajaya spent some RM55.443 billion on various subsidies last year, an increase of 322.1% compared to 2021.

The economy minister has been championing a move away from blanket subsidies to targeted subsidies. Currently, the government subsidises commodities such as fuel, cooking oil and locally produced rice.

In a recent Bloomberg interview, Rafizi estimated that the country could save at least US$1 billion (RM4.73 billion) to US$2 billion (RM9.47 billion) once it shifts to targeted subsidies.

Previously, Prime Minister Anwar Ibrahim had also said detailed plans for implementing targeted subsidies would be presented during the tabling of the budget this month.

So far, it is not known how the government will implement such subsidies.