BEGINNING 30 September 2025, the price of RON95 petrol in Malaysia will be reduced from RM2.05 to RM1.99 per litre under the targeted fuel subsidy initiative known as BUDI95, the Ministry of Finance has confirmed.
The move, aimed at easing cost-of-living pressures while containing inflation, is expected to bring measurable macroeconomic benefits.
Prime Minister Datuk Seri Anwar Ibrahim, in announcing the policy, said the reduction seeks to ensure that subsidies are distributed fairly and effectively to those who genuinely qualify, while curbing leakage associated with blanket subsidies.
“This initiative is designed to ensure that subsidies are equitably distributed to eligible users, while also eliminating systemic inefficiencies and wastage,” he said.
According to OCBC Global Markets Research, the 3.0 per cent price cut is likely to dampen inflationary pressure and support economic growth.
"The fuel price adjustment could reduce annual inflation by approximately 0.1 percentage point. While water subsidy rationalisation is expected to add inflationary pressure in August and September, the RON95 price cut from 30 September will help offset this," the research note stated.
OCBC further projected that Bank Negara Malaysia (BNM) would hold its Overnight Policy Rate (OPR) steady at its upcoming meeting on 6 November, citing a balanced inflation outlook.
Meanwhile, CIMB Treasury and Markets Research highlighted that the Department of Statistics Malaysia (DOSM) is likely to apply a volume-weighted approach in evaluating the price impact of RON95, which may contribute to a mild deflationary effect on the Consumer Price Index (CPI).
“This move is broadly neutral-inflationary, allowing Malaysians to benefit from lower pump prices and remains consistent with BNM’s guidance that domestic reforms will have a limited inflationary impact,” CIMB stated.
CIMB projects headline inflation to average 1.5 per cent in 2025, rising modestly to 2.0 per cent in 2026, reflecting a continued emphasis on price stability and real positive interest rates.
The BUDI95 programme will provide monthly subsidised RON95 fuel for up to 300 litres per eligible Malaysian. The scheme is open to citizens aged 16 and above who possess a valid driving licence.
However, e-hailing drivers are exempt from the 300-litre cap and may apply for additional subsidised fuel to avoid disrupting their livelihoods.
The Ministry of Finance clarified that Malaysians without a valid driving licence would not be eligible for the BUDI95 rate, even if they are vehicle users.
This condition, while aiming to prevent misuse and ensure legitimate usage, may spark public debate, particularly among citizens who rely on private vehicles without formal driving documentation.
Economists note that the targeted subsidy mechanism offers dual benefits: easing household financial burdens and reducing unsustainable fiscal outlays linked to blanket fuel subsidies.
For many Malaysians, especially gig workers and daily commuters, the price adjustment represents a meaningful relief amid a broader environment of rising living costs, including food, rent and services.
While the policy has been largely welcomed, analysts stress that effective implementation and a robust digital infrastructure are vital to ensure the scheme’s success and avoid new administrative challenges.
The government has stated its commitment to monitoring the programme closely and fine-tuning it as needed to ensure that the benefits reach the intended groups efficiently and transparently. -September 23, 2025
