Malaysia’s Budget 2025: Will Petrol Subsidies Be Cut?
In the lead-up to the unveiling of Malaysia’s Budget 2025 on October 18, the primary focus has been on the government’s possible move to slash petrol subsidies. With the country’s economy showing signs of recovery and the ringgit strengthening, Prime Minister Anwar Ibrahim has hinted at further actions to improve public finances.
The challenge for the government lies in reducing its massive subsidy billโwhich amounted to RM81 billion in 2023โwhile avoiding a backlash from the public.
Diesel Subsidies Already Cut, What’s Next for Petrol?
Earlier this year, Malaysia cut diesel subsidies, leading to a 56% increase in diesel prices. This move, expected to save RM4 billion annually, sparked public dissatisfaction, despite cash assistance measures for affected low-income diesel owners.
The next likely target is the RON95 petrol subsidy, which forms a significant portion of the country’s subsidy expenditure. The government aims to bring the subsidy bill down to RM52.8 billion in 2024. Analysts believe that these subsidies disproportionately benefit higher-income households, making them a key area for reform.
No Immediate Petrol Price Hikes Expected
However, experts predict that any changes to petrol subsidies in the upcoming budget will be implemented gradually. Mr. Anwar, who also serves as Finance Minister, is likely to take a cautious approach to avoid a sharp rise in living costs.
The government is wary of public sentiment and understands that sudden price hikes could trigger widespread dissatisfaction, especially at a time when inflation remains a concern. The focus is expected to be on gradual adjustments to subsidy spending, paired with increased support for low-income households.
No Immediate Return of GST
Additionally, the highly debated Goods and Services Tax (GST) is not expected to make an immediate comeback. Analysts suggest that any move to reintroduce GST will be rolled out slowly, giving Malaysians time to adjust and ensuring the necessary systems are in place for smooth implementation.
Focus on Wages and Inflation
Instead of subsidy cuts, Budget 2025 may feature policies aimed at increasing wages to combat rising inflation. This would help ease the financial burden on Malaysians as the government explores new strategies to balance its finances while maintaining public support.
