Malaysia mulls further fuel subsidy cuts even as election looms

[KUALA LUMPUR] Malaysia will continue with its fuel subsidy reform despite the possibility of a general election this year, according to Deputy Finance Minister Liew Chin Tong.

The government is considering whether to “slightly reduce the quota” of subsidised fuel for Malaysians to manage demand, while ensuring that lower-income individuals are protected in the global energy crisis, Liew said at an event on Tuesday (May 12). Another measure under review is to shift diesel usage for Borneo states to a similar subsidised allocation mechanism, he said.

Policymakers in the South-east Asian country are preparing for a more targeted approach in subsidies as global energy costs remain elevated from the war in Iran. Over the weekend, Prime Minister Anwar Ibrahim said that the government was reviewing a rationalisation of fuel subsidies for higher-income earners.

While Liew does not rule out the possibility of a general election this year, he said that he does not “see political factors coming into this”.

The move comes as Malaysia faces a sharp increase in fuel subsidy spending. The country was expected to spend about RM7 billion (S$2.3 billion) on fuel subsidies in April, about 10 times more than before the conflict, highlighting a mounting fiscal strain.

Liew said ensuring “consistent supply for as long as possible” was a bigger concern for him at the moment than fiscal issues.

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The government reduced the subsidised fuel allocation for its most popular fuel from 300 litres to 200 litres per citizen in April. The subsidised price has remained unchanged at RM1.99 per litre since the Iran war started on Feb 28. Diesel in Sabah and Sarawak has been capped at RM2.15 per litre. BLOOMBERG