Malaysia is preparing to implement fuel subsidy reforms in the second half of 2025, with the government continuing to refine the plan as global trade tensions, including new US tariffs, weigh on the country’s economic outlook.

A spokesperson from the Ministry of Finance (MOF) said the government “will continue to assess inputs and feedback in refining details” of the planned RON95 petrol subsidy revamp. Engagements with a wide range of stakeholders are ongoing.

Prime Minister Datuk Seri Anwar Ibrahim had earlier announced that the government aims to cut subsidies for RON95 petrol by mid-2025. The proposal outlines a two-tier pricing system where only the top 15% of income earners would pay market rates, while the remainder of the population would continue to enjoy subsidised prices. The move is expected to generate annual savings of around RM8 billion (US$1.9 billion).

“The government remains committed to implementing the RON95 subsidy rationalisation in the second half of 2025, and will be sharing further details in due course,” the ministry spokesperson added.

Anwar, who is midway through his five-year term and also serves as finance minister, faces growing pressure from lawmakers to delay the reform, citing concerns over rising costs and potential impacts on business sentiment. A similar adjustment to diesel subsidies last year bolstered public finances but coincided with a by-election loss for the ruling coalition.

To allay public concerns, Anwar stated in March that a government study showed the planned cuts would not impact 80% to 90% of Malaysians. Recent declines in global oil prices have eased the political risks associated with the move.

The reform process comes at a time when Malaysia is also contending with fresh global challenges. US President Donald Trump’s administration recently imposed a 10% tariff on Malaysian goods, with further hikes temporarily paused for 90 days. Malaysian officials are seeking to negotiate terms with Washington during this window.

In the meantime, the government has deferred a planned expansion of the sales and service tax, originally scheduled for 1 May, offering some relief to local industries. However, electricity prices are set to rise in July.

Despite external pressures, Second Finance Minister Datuk Seri Amir Hamzah Azizan said in April that the government remains confident in achieving its fiscal target of reducing the budget deficit to 3.8% of GDP in 2025, down from 4.1% in 2024.

According to the MOF spokesperson, efforts are being made to ensure the implementation of the petrol subsidy rationalisation is “as smooth as possible for Malaysians and effective in meeting its objectives.”

“The overarching objective remains clear — to ensure that most Malaysians continue to enjoy RON95 at subsidised prices while addressing the leakage of subsidies to foreigners, businesses, and the highest income earners,” the spokesperson said.

(Source: Bloomberg News)

• TAGS:
• Datuk Seri Amir Hamzah Azizan
• Fuel Subsidy
• Ministry of Finance
• Petrol
• RON95
• RON95 subsidy rationalisation