Malaysia’s government has ruled out cutting subsidies, saying petroleum subsidy spending could reach RM40 billion in 2026 amid global uncertainties.
PETALING JAYA: The government has no plans to reduce existing subsidies despite projecting that petroleum subsidies could reach nearly RM40 billion this year, Deputy Finance Minister Liew Chin Tong said.
Liew said the government saw no immediate need to revise its 2026 fiscal projections based on its financial performance in the first half of the year, although the situation would be reviewed again in October.
“For now, based on what we have seen in the first half of 2026, we do not see a need to change the projections.
“But when we reach October, we will review the situation, particularly the impact of developments in West Asia,” he told the Dewan Rakyat during Ministers’ Question Time.
Liew said the government incurred almost RM800 million a month in subsidies for RON95 petrol and diesel in January and February before the expenditure surged to about RM5 billion a month in March and April.
Monthly subsidy expenditure then eased to about RM4 billion in May and June, while oil prices continued to moderate in July.
“If current market prices remain, the government is expected to bear petroleum product subsidies of nearly RM40 billion in 2026, subject to developments in the West Asia crisis,” he said.
Liew said this in response to Mohd Syahir Che Sulaiman (PN-Bachok), who asked how the conflict had affected fuel subsidy spending and whether the higher costs could derail the government’s 2026 fiscal deficit target.
He further clarified that higher oil prices also increased petroleum-related revenue, partially offsetting the additional subsidy burden.
He said every US$1 change in global crude oil prices was estimated to affect federal petroleum-related revenue by about RM300 million, excluding Petronas dividends.
He said any revision to the government’s 2026 fiscal projections, if required, would be announced during the tabling of Budget 2027 after taking into account the latest economic indicators and revenue and expenditure performance for the first half of the year.
“Nevertheless, the government remains confident that the medium-term fiscal consolidation trajectory can be maintained through targeted subsidies, the reprioritisation of expenditure, continued efforts to improve spending efficiency, and stronger revenue collection and tax compliance.”
Responding to Mohd Sany Hamzan (PH-Hulu Langat), who asked whether food subsidies and government aid would be reduced, Liew said the BUDI MADANI programme ensured RON95 petrol remained at RM1.99 per litre even when market prices reached RM5 per litre, while maintaining stable fuel supplies.
“The government will not reduce any of the existing subsidies. That is the government’s position for now,” he said.
