RON95 Subsidy Could Save Govt RM4B Without Raising Debt - MOF

The Finance Ministry (MOF) says Malaysia’s move to introduce targeted subsidies for RON95 petrol isn’t about adding debt but it’s about cutting long-term liabilities and putting the country on stronger financial footing.

According to the ministry, the shift is expected to save between RM2.5 billion and RM4 billion a year, based on current fuel consumption and the estimate that about 20% of RON95 users today shouldn’t actually be receiving subsidies. 

The savings projection also factors in global crude oil prices of US$60 to US$80 per barrel and the removal of subsidies for non-targeted groups, including foreigners and commercial vehicles.

"The money saved will be redirected to things Malaysians actually need more of like better education facilities, improved healthcare, and upgraded public transport," it stated. 

MOF also stressed that a targeted approach helps avoid a sudden jump in fuel prices, which means no steep inflation shock. Inflation is expected to stay below 2% in both 2025 and 2026, even with the changes.

It also noted that targeted subsidies make more sense because Malaysians have different daily travel needs, and a blanket price increase would hit lower-income and high-mileage users the hardest.

"This policy is a key part of a more responsible and sustainable fiscal strategy that reduces waste, avoids adding to national debt, and ensures subsidies go to those who truly need them," MOF added.

The explanation was provided in a written response to the Dewan Rakyat, following a question from Pandan MP Datuk Seri Mohd Rafizi Ramli on projected savings, costs, and how the government plans to use the funds in the coming years

Source: Bernama.