MALAYSIA’S fuel subsidy system is coming under renewed pressure as economists urge the government to end subsidised RON95 petrol access for wealthy households, warning that rising fiscal burdens could undermine broader economic reform efforts.
Analysts said subsidy rationalisation is becoming increasingly unavoidable as the government struggles to balance public spending, deficit targets and growing cost-of-living concerns amid uncertain global energy markets.
The debate centres on the BUDI MADANI RON95 subsidy scheme, which critics argue continues to benefit affluent consumers despite their ability to absorb market-based fuel prices.
Chief Economist at Bank Muamalat Malaysia Bhd, Dr Mohd Afzanizam Abdul Rashid, said the subsidised RON95 rate of RM1.99 per litre should remain in place for ordinary Malaysians, particularly middle- and lower-income groups, but no longer be extended universally.
According to him, reallocating subsidy support away from wealthier consumers would allow the government to direct greater assistance towards households that genuinely require financial relief.
“The review of BUDI95 subsidies for the wealthy should be implemented because high-income groups have the financial capability to pay fuel prices based on market rates,” he said.
“Most high-income earners also receive benefits such as car allowances, petrol allowances and similar facilities.
“Therefore, they have the financial capacity to pay at market prices,” he added.
The renewed discussion follows confirmation from Prime Minister Datuk Seri Anwar Ibrahim that proposals to reassess the current RON95 subsidy mechanism are being studied by the Crisis Management Task Force operating under the National Economic Action Council, chaired by Tan Sri Mohd Hassan Marican.
The issue has become increasingly urgent as global oil price volatility continues to place pressure on public finances, with Malaysia maintaining one of the region’s most heavily subsidised fuel systems.
UniKL Business School economic analyst Associate Professor Dr Aimi Zulhazmi Abdul Rashid said subsidy reforms were necessary to preserve long-term fiscal stability and avoid further strain on government borrowing capacity.
He warned that annual fuel subsidy commitments could reach RM60 billion, far exceeding allocations projected under Budget 2026.
“It will create further challenges for the government’s fiscal deficit, which is already under pressure as borrowing levels cannot exceed 65 per cent of gross domestic product,” he said.
The prospect of reducing universal fuel subsidies remains politically delicate, particularly at a time when households continue to face rising living costs and inflationary pressures.
However, economists argue that maintaining broad-based subsidies for wealthier groups risks weakening the government’s ability to fund social assistance, infrastructure and other long-term development priorities.
The debate is also emerging as a key test of the Anwar administration’s willingness to pursue difficult but potentially transformative economic reforms despite possible political backlash. - May 11, 2026
