If further proof were needed that fiiel subsidies are hurting Asian government finances, Malaysia has provided it The country is Asia's sole net crude exporter, making fuel subsidy cuts particularly hard to take for the local population. But Kuala Lumpur has this month trimmed subsidies for diesel and gasoline by 10.5%-11 %, making Malaysia the third major Asian nation this year, after India and Indonesia, to move decisively to cut its subsidy bill in an attempt to limit ballooning fiscal deficits and keep foreign investors on board (PIW Sep.9' 13). The prospect that a US economic recovery may finally be underway has prompted investors to take a long, hard look at Asian economies where fandamen-tals have been deteriorating over the past four years, due to loose monetary policy and a lack of supply-side structural reforms, investment bank Nomura says. The Malaysian cut, which leaves diesel still relatively cheap at 2.00 ringgit (610) per liter, comes after Indonesia raised gasoline and diesel prices by a whopping 44% and 22% respectively in June, leaving diesel at 5,500 rupiah/liter (480), while India decided in January to progressively increase retail diesel prices by 50 paisa (less than 10) every month, leaving them at 51.97 rupees/liter (800) in New Delhi.
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