Malaysian Public Anticipate Removal of Petrol Subsidies in Upcoming Budget

As Malaysia prepares for the unveiling of Budget 2025 on October 18, public attention has centered on whether the government will cut petrol subsidies, a significant issue given the country's efforts to improve public finances. Prime Minister Anwar Ibrahim has expressed confidence in Malaysia’s economic growth but acknowledges the need to manage government spending, which involves carefully reducing subsidies without triggering widespread discontent.

In June 2024, Malaysia took a step by cutting diesel subsidies, saving approximately RM4 billion annually. Diesel prices rose by 56%, leading to public dissatisfaction despite cash assistance for certain affected groups, such as low-income diesel vehicle owners who received RM200 monthly to offset fuel costs.

The next likely target is the RON95 petrol subsidies, which accounted for a significant portion of the RM81 billion spent on subsidies in 2023. These subsidies, seen as benefiting higher-income households more than low-income ones, are expected to be reduced as part of the government’s plan to cut the subsidy bill to RM52.8 billion in 2024.

However, analysts predict that Budget 2025 will not immediately eliminate blanket petrol subsidies or reintroduce the Goods and Services Tax (GST). Instead, the government is expected to gradually implement these changes, giving time for smoother execution and addressing public concerns about the cost of living. Additionally, wage adjustments may be introduced to help Malaysians cope with inflation, which could provide some relief as the government navigates its fiscal reforms.