Malaysia’s fuel subsidy expenditure is expected to reach nearly RM40 billion in 2026 if current oil market conditions remain, following pressure from the ongoing West Asia conflict, Deputy Finance Minister Liew Chin Tong told the Dewan Rakyat.
Responding to a question from Mohd Syahir Che Sulaiman (Bachok) on the impact of the geopolitical conflict on fuel subsidies and the 2026 fiscal deficit target, Liew said global crude oil market uncertainty had significantly increased government subsidy costs.
He said the government spent almost RM800 million a month on RON95 and diesel subsidies in January and February 2026 before the amount surged to around RM5 billion monthly in March and April following the escalation of tensions in West Asia.
Subsidy costs moderated to around RM4 billion in May and June as oil prices eased, with Liew saying the government expects petroleum product subsidies to total close to RM40 billion for the year, depending on developments in the regional crisis.
However, Liew noted that higher oil prices also contributed to increased petroleum-related government revenue. He said every US$1 per barrel increase in global crude oil prices is estimated to generate around RM300 million in additional federal petroleum-related revenue, excluding dividends from PETRONAS.
He added that the government continues to monitor revenue collection and expenditure performance to ensure operating expenditure needs remain manageable.
Liew said the government is also conducting weekly engagement sessions through the Crisis Management Task Force under the National Economic Action Council to monitor energy supply, cost of living pressures and economic resilience.
He added that any revision to the 2026 fiscal outlook would be announced during Budget 2027 after considering economic indicators, revenue performance and expenditure trends for the first half of the year.
Liew also highlighted that the targeted subsidy mechanism under BUDI, introduced in September 2025, helped shield Malaysians from sudden fuel price shocks while ensuring subsidies reached eligible citizens and reducing leakages from smuggling activities.
