Malaysia’s diesel subsidy cut hailed as positive economic move but fears of voter backlash linger

The move will save about 4 billion ringgit (US$852 million) annually, Prime Minister Anwar Ibrahim said in a televised address on Tuesday night (May 21), saying the blanket subsidy is no longer sustainable as it benefits the “ultra-rich”.

“Any targeted subsidy should not burden the majority of the people,” he added.

Much of Malaysia’s cheap diesel has been poured into luxury sport utility vehicles and pickup trucks that function as personal vehicles and is often smuggled across the border into Thailand.

Older diesel-powered pickup trucks could become the go-to vehicles of many odd-job workers who may not be eligible for the new subsidy scheme as such trucks are not affected by the latest measure.

Saiful Abdullah, an owner of an appliance repair business, said he was unsure of his eligibility for assistance and was assessing the financial impact on his business.

“Whether I like it or not, I might need to pass this cost to my customer,” he told This Week in Asia.

Capped at 2.15 ringgit (US$0.46) per litre since 2021, the price of subsidised diesel is 60 per cent lower than unsubsidised diesel at around 3.48 ringgit (US$0.74).

“I spend around 120 ringgit (US$25) for a full tank of diesel. Soon that will go up to around 210 ringgit (US$45), said Saiful, who calculated his spending on diesel monthly would nearly double to 840 ringgit (US$179).

In his speech, Anwar recognised that the subsidy change “is not an easy one” and required everyone to step out of their comfort zone “so that change can happen”.

“The economic progress achieved is meaningless if we are still plagued by narrow thinking and there is no will or effort to change,” he said.

With the new measures, Malaysia is projected to spend 52.8 billion ringgit (US$11.26 billion)