KUALA LUMPUR: In the lead-up to the unveiling of Malaysia’s Budget 2025 this Friday (Oct 18), most of the public attention has been on a singular issue: Whether the government will finally slash petrol subsidies.

While Prime Minister Anwar Ibrahim revels in the country’s resurgent economy and strong ringgit showing, he recently said that more can be done to improve public finances. This is usually done by earning more and spending less. 

The latter is a delicate balancing act: Mr Anwar must trim Malaysia’s spiralling subsidy and social assistance bill, but not so much that it triggers public wrath.

On Jun 10, Malaysia cut diesel subsidies in a move that was expected to save RM4 billion (US$928.9 million) a year. Diesel prices were floated and quickly rose by 56 per cent, and unhappiness grew despite the cash assistance that was given to some affected segments. 

This included low-income private diesel owners who were able to apply for a monthly cash payout of RM200 to defray the cost of the fuel.

What’s next is the blanket subsidies for RON95 petrol, which make up most of the RM81 billion that Malaysia spent on subsidies in 2023 and are said to unfairly benefit high-income households. The aim is to reduce this bill to RM52.8 billion this year.

While analysts told CNA that Malaysia is expected to give more clarity on plans to cut subsidy spending and raise tax revenues on Friday, they do not see Malaysians being immediately hit with rising prices.

They predicted that Mr Anwar, who doubles as Finance Minister, will not immediately remove blanket petrol subsidies and bring back the Goods and Services Tax (GST).

This is because the government aims to spread out such moves, wary of public concerns over costs of living and the need for more time to ensure such moves are implemented smoothly, they said.

The analysts also added that Malaysians could instead see a bump in their salaries as wage policies are tweaked to combat inflation.

Related:Malaysia central bank upbeat as economy grows at fastest pace in six quarters Commentary: The politics at play in Malaysia’s upcoming budget

Mr Anwar recently told CNBC - the American business news channel - that the budget will focus on raising income levels amid rising inflation, and after committing to boost civil servant salaries, he has hinted at introducing some “pressure” on the private sector to follow suit.

This could involve moves to review individual tax relief policies, expand the progressive wage policy, or raise the minimum wage, which currently stands at RM1,500, the experts told CNA.

Friday’s budget comes amid a backdrop of Malaysia's strengthening economy and currency, which have been attributed to the government’s clear policies in growth sectors and rising investor confidence.

On Oct 8rich 888, the World Bank upgraded Malaysia’s growth outlook to 4.9 per cent from 4.3 per cent, saying that the country is expected to continue fiscal consolidation.

Malaysia Prime Minister Anwar Ibrahim displays the budget booklet ahead of its presentation in parliament on Feb 24, 2023. (Photo: CNA/Fadza Ishak)

• rich 888
• New
• Cuts
• subsidy
• Petrol