Diesel fuel prices in much of Malaysia are poised to surge by approximately 50% on Monday as the government shifts from broad subsidies to a targeted approach aimed mainly at assisting the needy. Malaysia, known for heavily subsidising fuel, cooking oil, rice, and other essentials, has witnessed a sharp increase in its subsidy expenditure in recent years due to soaring commodity prices, putting strain on government finances.
The diesel subsidy bill alone has skyrocketed from 1.4 billion ringgit in 2019 to 14.3 billion ringgit in 2023. Last month, the government announced plans to reduce diesel subsidies this year, anticipating annual savings of about 4 billion ringgit (USD 853.24 million), which will be redirected to support low-income groups. In a statement on Sunday, the Finance Ministry outlined its strategy to adjust diesel fuel prices in line with market rates.
Effective midnight, the retail price of diesel fuel will climb to 3.35 ringgit (USD 0.71) per liter at all petrol stations across Peninsular Malaysia. However, it will remain at 2.15 ringgit per liter in Malaysian states and territories on Borneo, as well as for eligible logistics vehicles under the government’s subsidised diesel control system. The ministry also announced lower diesel prices for fishermen and land public transport vehicles such as school buses and ambulances.
To mitigate the potential impact on incomes, the government plans to offer cash assistance to eligible Malaysian individuals with diesel vehicles, as well as small-scale farmers and commodity smallholders. Despite the subsidy cuts, diesel prices in Malaysia will still rank among the lowest in Southeast Asia. The ministry pointed out that diesel retails at 8.79 ringgit per liter in Singapore, 4.43 ringgit in Indonesia, and 4.24 ringgit in Thailand.