Malaysia flags sharp rise in 2026 fuel subsidies

Malaysia expects its fuel subsidy bill for 2026 to rise sharply, with projected spending close to RM40 billion if current crude oil prices persist. The projection was presented in a written reply to parliament by Prime Minister and Finance Minister Anwar Ibrahim, highlighting the growing fiscal impact of sustaining regulated fuel prices.

The estimated RM40 billion outlay for petrol and diesel subsidies is more than double the RM15 billion earmarked for this purpose in Budget 2026. This widening gap between allocation and projected spending underscores the budgetary pressures created by prolonged high energy prices.

Anwar stated that the government spent about RM1.6 billion subsidising RON95 petrol and diesel in January and February 2026. In the subsequent months of March and April 2026, monthly subsidy costs rose to around RM5 billion, reflecting the combined effect of global price trends and domestic pricing commitments.

These higher monthly outlays form the basis of the revised full-year projection, suggesting that if similar spending levels persist, overall fuel subsidy costs will significantly exceed initial budget assumptions for 2026.

The government is maintaining targeted fuel subsidies through several schemes. Under the BUDI95 mechanism, RON95 petrol is provided at RM1.99 per litre to eligible consumers. In addition, fishermen receive subsidised diesel at RM1.65 per litre, supporting fuel affordability for this group.

For diesel users more broadly, the Budi Diesel mechanism sets a subsidised retail price of about RM2.10 per litre for eligible users. Other related controlled price points cited include RON95 at RM2.05 per litre and diesel at RM2.15 per litre within specific control systems, illustrating the structured approach to price support across fuel types.

The government plans a national rollout of the Budi Diesel scheme from July 1, 2026. Under this expansion, eligible private diesel vehicle owners will be able to purchase diesel at about RM2.10 per litre, reinforcing targeted support for households and businesses reliant on diesel vehicles.

Authorities estimate that around 700,000 vehicles will qualify under the nationwide Budi Diesel programme. Officials have indicated that targeted subsidy measures will continue, with policymakers monitoring fiscal capacity and fuel supply security as global energy markets remain volatile.