In fact, it said, the level of assistance is still insufficient. The institution pointed out that a more targeted subsidy framework for the benefit of lower-income households would now be relevant and timely.

“In parallel, access to good jobs and secure employment are fundamental to alleviate poverty and reduce income inequality,” it said at the launch of the September 2023 World Bank Malaysia Economic Monitor (MEM) today.

However, the World Bank said, blanket subsidies should be reduced. It acknowledged that raising taxes or lowering the subsidies on fuel would increase the cost of living for all, including poorer households.

Nonetheless, it said, improving the targeting of existing social assistance could more than offset any such increase in costs.

Furthermore, a portion of the additional revenue or savings could be allocated to augment the social assistance budget, leading to a further reduction in poverty and inequality while making fiscal gains.

The World Bank said that redirecting the 2022 fuel subsidy budget into expanded and refocused social assistance could double poverty reduction while generating 1.6% in fiscal savings for the gross domestic product.

Citing the 2019 household income and basic amenities survey as well as household expenditure survey and World Bank staff calculations, it compared the fiscal cost and impact on poverty of more focused social assistance initiatives to the 2022 fuel subsidy baseline.

The survey showed that improving social assistance at current budget levels will not only offset the impact of removing fuel subsidy but will also result in a slight improvement in poverty reduction.