Malaysia urged to shift from short-term fuel subsidies to biofuels and cash aid
A senior economics lecturer argues that Malaysia's Budi95 petrol subsidy is fiscally unsustainable and calls for biofuel development and direct cash assistance to households.
Under the Budi95 programme, eligible Malaysians receive RON95 petrol at RM 1.99 per litre, limited to 300 litres each month, a measure intended to ease the government's fiscal burden. However, Ministry of Finance data show monthly subsidy outlays rising from RM 0.7 billion in January 2026 to RM 3 billion in March and RM 5 billion in May, a 300-600% increase driven by crude prices above US$100 per barrel. The letter contends that while such targeted subsidies curb short-term inflation, they do not solve long-run price vulnerability.
It proposes two strategies: first, invest in domestic biofuel research and production, capitalising on Malaysia's palm-oil advantage; second, replace limited fuel subsidies with a direct cash assistance scheme similar to Sumbangan Asas Rahmah for lower-income households. Together, these measures would lessen reliance on imported oil, stabilise pump prices, and lessen the fiscal strain on the national budget.
