The Budi95 initiative transforms the subsidy from a costly universal benefit into a privilege reserved for Malaysian citizens. — FAIHAN GHANI/The Star
THE government’s decision to implement the Budi Madani RON95 (Budi95) petrol subsidy initiative marks a significant policy milestone in Malaysia’s approach to economic management.
Beyond a simple price adjustment, it reflects the government’s shift from decades of broad-based subsidies toward a more targeted model aimed at strengthening fiscal discipline and promoting structural reform.
For years, the universal fuel subsidy—a policy designed to keep the cost of living low—came at an exorbitant price.
Estimates have shown that fuel subsidies have cost Malaysia tens of billions of ringgit annually, depending on global oil prices and domestic consumption.
This enormous expenditure not only bloated the national deficit but also masked fundamental economic realities.
According to government statements and economists, the previous system is believed to have disproportionately benefited higher-income groups, who consumed more fuel.
It also contributed to leakages through smuggling and purchases by foreign-registered vehicles and large industrial users.
This effectively made the subsidy an inefficient and regressive transfer of wealth, draining public funds without effectively targeting those who needed it most.
Ending wastage
The Budi95 initiative is intended to transform the subsidy from a costly universal benefit into a privilege reserved for Malaysian citizens, framed within a transparent system that aims to reward fiscal prudence and consumer efficiency.
The primary aim behind this policy is not short-term savings, but long-term fiscal stability, according to government statements.
Economists note that the value of Budi95 lies not just in the money saved, but in the structural reforms that reduce wastage and improve oversight.
Williams Business Consultancy Sdn Bhd founder and economist Professor Geoffrey Williams said this stems directly from improving the integrity of the supply chain.
“The savings are from the system reset, which cuts theft mostly by Malaysian-run cartels selling subsidised petrol across borders,” he explained.
He also emphasised that the policy’s design could prevent cost-of-living shocks for a majority of Malaysians.
“The 300-litre quota covers more than 99% of users. There will be no inflationary impact because the effective price has gone down, and almost no one needs to use more than the quota per month,” he said.
By rationalising this expenditure, the government expects to redirect fiscal resources toward more productive sectors such as education, healthcare, and infrastructure, or back to the people through targeted assistance.
The approach is also intended to signal disciplined financial management, a message that resonates with investors and international rating agencies.
Fairness and predictability
This targeted approach reportedly allows Malaysians to purchase RON95 petrol at a subsidised price of RM1.99 per litre, down from the previous RM2.05, up to a limit of 300 litres per month, verified via a valid MyKad and driving licence.
Federation of Malaysian Consumers Association (FOMCA) chief executive officer Saravanan Thambirajah emphasised the necessity of this reform, stating that blanket subsidies are fiscally unsustainable and unfair.
“A targeted model ensures that support reaches the right groups while preventing wastage.”
Saravanan added that the new fixed price and quota are a turning point because they introduce certainty.
“Families can now plan their fuel spending, which is one of the largest recurring expenses for many households, with greater confidence.
“The quota is designed to cover normal commuting and family mobility needs, and that predictability is what empowers households to manage daily expenses more effectively.”
He added that the system essentially flattens benefits so that they are aligned with reasonable usage rather than excessive consumption.
Governance integrity
Beyond the domestic impact, economists view the rollout of Budi95 as a signal to the global financial community.
This decisive policy action demonstrates the government’s long-term commitment to fiscal discipline—a key requirement for attracting foreign direct investment, strengthening the ringgit and improving the nation’s sovereign credit rating.
The political will to implement this reform underscores the government’s commitment to broader fiscal measures, such as the Fiscal Responsibility Act 2023.
It establishes a necessary foundation by proving that the administration can execute painful reforms without causing social chaos.
In essence, the Budi95 initiative is more than a subsidy mechanism—it is widely viewed as a statement of governance integrity.
By redefining the subsidy as a targeted benefit, tightening enforcement to reduce leakages, and prioritising fiscal stability, Malaysia is laying the groundwork for a more resilient and competitive economy.
The long-term success of the initiative will ultimately be measured by its sustained ability to convert billions in savings into tangible, structural benefits for the nation.
