RON95 Fuel Reform: Political Survival vs Fiscal Prudence, Warns Analyst

KUALA LUMPUR: Malaysia’s recalibrated RON95 petrol subsidy reform risks prioritising political survivability over fiscal prudence, according to economic analyst Amalina Anuar.

“With three state elections looming and a national poll due by 2027, scaling back unlimited cheap fuel may dent the government’s electoral fortunes,” said Amalina, Senior Director at FMT Business and Visiting Fellow at ISEAS–Yusof Ishak Institute.

She noted that Putrajaya has softened the blow in three key ways: narrowing subsidy removal to only the top 5% of earners and foreigners, retreating from reliance on the unpopular Padu database, and delaying reforms to late 2025 while fine-tuning an identity card-based system.

“These compromises may enhance political survivability but risk undermining the original objective of financial savings,” Amalina said.

The May 26 adjustment slashed potential savings from an estimated RM8 billion, while the July 23 announcement of a price cut to RM1.99 per litre for all Malaysians further entrenched fuel subsidies.

RON95 Fuel Reform

Amalina argued that Malaysia could instead adopt a quota system, limiting subsidised fuel to an average consumption threshold. “Eligible Malaysians would not receive unlimited subsidised fuel, but rather benefit up to a set quota, paying market rates for excess use,” she explained.

She stressed that reform must “satisfy two imperatives: systematic fairness and genuine government savings.” Current piecemeal cash assistance, she said, is “suboptimal” as it addresses inequality without tackling deeper structural disadvantages.

Pointing to the backlash over the sales and service tax (SST) expansion in July, Amalina urged policymakers to pair subsidy reform with progressive measures. “Implementing RON95 reforms alongside higher taxes on the ultra-wealthy could ease public resistance and reinforce the legitimacy of reform,” she said.

“Malaysia cannot afford further postponement or dilution of difficult decisions,” she warned.

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