PETALING JAYA: Malaysia’s fuel subsidy bill is seen to remain contained despite the government’s recent moves to raise individual consumption quotas for subsidised RON95 petrol and diesel.
Socio-Economic Research Centre (SERC) executive director Lee Heng Guie said the restored monthly quotas were expected to have only a marginal impact on the overall subsidy bill because relatively few recipients previously exceeded the lower limits.
He said only about 1% of registered users consumed more than 200 litres of subsidised RON95 a month, while almost 95% of individual diesel recipients used less than 300 litres monthly.
This suggests that actual consumption of the additional subsidised allocation would remain controlled rather than rising automatically to the new maximum quotas.
“The restored monthly subsidised fuel quota is expected to have a marginal impact on the total subsidy bill,” Lee told StarBiz.
He estimated that petroleum and diesel subsidies would remain within the revised allocation of RM40bil for 2026, based on average crude oil prices of between US$80 to US$85 per barrel.
Lee said the government had also contained almost RM5bil in operating expenditure as at mid-July to manage fiscal pressures arising from the global oil shock caused by the Middle East conflict.
SERC expects Malaysia’s fiscal deficit to amount to between 3.5% and 3.6% of gross domestic product (GDP) in 2026.
However, Lee cautioned that restoring the higher fuel quotas while global oil prices remained elevated could pose a risk to fiscal sustainability, particularly if uncertainty surrounding the Middle East conflict persisted.
BIMB Securities chief economist Imran Nurginias Ibrahim said the higher Budi95 quota could add as much as 0.5% of GDP to the government’s subsidy expenditure under a maximum-use scenario.
However, that estimate assumed that all eligible recipients fully utilised their expanded allocations, making the likely cost considerably lower based on historical consumption patterns.
Imran said stronger-than-expected economic growth and government revenue collection should provide some room to absorb the additional spending, although this would offer only a partial offset.
“Higher revenue cannot necessarily compensate fully for a recurring increase in subsidies,” he told StarBiz.
Imran does not expect the measure to materially derail the government’s fiscal consolidation programme for now, as Budi95 remains targeted and does not represent a return to broad-based fuel subsidies.
Nevertheless, he said the additional expenditure would reduce the government’s fiscal buffer, making continued subsidy rationalisation and spending discipline important to preserve the deficit-reduction trajectory.
Also, Hong Leong Investment Bank (HLIB) Research estimated that the higher quotas could generate additional subsidy expenditure of up to 0.15% of GDP per month, or a cumulative 0.6% of GDP for the remainder of 2026.
Its maximum estimate assumed that all 16 million eligible Budi95 recipients fully utilised their monthly allocation of 300 litres, while about 700,000 eligible vehicles consumed the increased Budi Diesel entitlement of up to 400 litres a month.
The calculation was based on unsubsidised prices of RM3.82 per litre for RON95 and RM4.72 per litre for diesel at the time of its report.
HLIB Research said the estimated impact compared with the government’s 2026 fiscal deficit target of 3.5% of GDP and the research house’s own projection of 3.6%.
However, it expects the eventual cost to be substantially lower because actual Budi95 data between October 2025 and June 2026 showed that more than 99% of users consistently consumed less than 200 litres a month.
HLIB Research added that stronger revenue collection arising from better-than-anticipated economic growth could partly offset the higher subsidy spending.
It forecasts Malaysia’s economy to expand by 5.3% in 2026, exceeding the government’s official projection of 4% to 5%.
