Malaysia to Tweak Petrol Subsidies From End-September
(Bloomberg) -- Malaysia will tweak subsidies on the country’s most popular fuel by end-September, a move that will see foreigners paying higher pump prices as the government looks to narrow its budget deficit.
Foreigners will pay 2.60 ringgit (62 cents) per liter for the country’s cheapest petrol, known as RON95, effective Sept. 30, Prime Minister Anwar Ibrahim said in a speech on Monday. The government will continue to help Malaysians pay for the fuel, reducing the price for locals to 1.99 ringgit per liter from 2.05 ringgit.
The announcement effectively dilutes Anwar’s initial plan last October to remove gasoline subsidies for the country’s wealthiest 15% as he faced mounting public pressure and concerns over higher living costs. The government had previously anticipated savings of about 8 billion ringgit a year from the move and has yet to provide an estimate on how much it would be cutting back from its latest plan.
The police and military will be eligible for lower fuel prices from Sept. 27, and recipients of a government cash handout the following day, said Anwar, who doubles as finance minister. Other Malaysians will benefit from the cut in prices from Sept. 30.
“Some may criticize, why will the ultra-wealthy also get it? This is recognition for the people of Malaysia,” Anwar said in an address to civil servants.
Still, the government remains on track to achieve its aim of narrowing the budget deficit to 3.8% of gross domestic product this year, from 4.1% in 2024, despite the change in the target group, according to Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd.
“The government is trying to strike a delicate balance between fiscal discipline and its impact to the cost of living,” Afzanizam said. “The latest measures should not create a negative shock to the system. In some sense, it’s a pragmatic approach.”
Malaysia’s fiscal deficit is already on a declining trend, with the gap at 4.2% of GDP in the first half of the year, compared with 5.5% in the same period in 2024, he added. That’s on the back of higher revenue collection and lower spending, he said.
Total spending on subsidies has dropped 25.7% year-on-year in the first half of 2025 to 23.6 billion ringgit, he added.
Anwar said Monday the cheaper fuel price for Malaysians is capped at 300 liters a month, although drivers for e-hailing companies may apply for a higher ceiling. More than 16 million Malaysians are set to benefit from the lower prices, he added.
The savings from the petrol subsidy reform would be channeled to existing cash handout programs as well as toward improving healthcare, education and basic infrastructure, Anwar said.
(Updates with additional details in third paragraph, economist’s comment starting in sixth paragraph.)
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