The government’s decision to raise subsidised petrol and diesel quotas could result in additional subsidy spending of as much as 0.6% of Malaysia’s gross domestic product (GDP) for the remainder of 2026, although the actual fiscal impact is likely to be considerably lower given historical fuel consumption patterns, according to Hong Leong Investment Bank (HLIB).
The measures form part of six initiatives announced by Prime Minister Datuk Seri Anwar Ibrahim on Aug 30 aimed at easing cost-of-living pressures while providing additional support to businesses, education, healthcare digitalisation and young people.
Among the most significant is the restoration of the monthly BUDI95 subsidised RON95 petrol quota to 300 litres from 200 litres, effective Sept 1, benefiting more than 16 million eligible users.
The BUDI95 quota was initially set at 300 litres per month before being reduced to 200 litres from April 1.
Second Finance Minister Datuk Seri Amir Hamzah Azizan had said on Aug 3 that more than 85% of the 16.7 million eligible individuals — or close to 14.2 million people — had benefited from the subsidised RON95 price of RM1.99 per litre.
Diesel assistance is also being expanded.
More than 500,000 eligible diesel vehicle owners, including owners of qualifying four-wheel-drive vehicles and pick-up trucks, will be entitled to BUDI Diesel assistance of up to 400 litres per month.
Previously, the government had set the BUDI Diesel allocation at 200 litres per month in June, to be shared with RON95. Owners of eligible four-wheel-drive vehicles and pick-up trucks could apply for an additional 100 litres, bringing the maximum entitlement to 300 litres per month.
Maximum Fiscal Cost Could Reach 0.6% Of GDP
HLIB estimated that if all roughly 16 million eligible BUDI95 users fully utilise their 300-litre monthly allocation and about 700,000 eligible vehicles consume the maximum higher BUDI Diesel entitlement of up to 400 litres per month, the additional subsidy cost could amount to as much as 0.15% of GDP each month.
That would translate into a maximum additional fiscal impact of around 0.6% of GDP for the remainder of 2026.
The estimate is based on unsubsidised fuel prices of RM3.82 per litre for RON95 and RM4.72 per litre for diesel at the time of the report.
The potential expenditure compares with the government’s 2026 fiscal deficit target of 3.5% of GDP and HLIB’s own forecast of 3.6%.
However, the research house indicated that this represents an upper-bound scenario rather than its expectation of actual expenditure.
Historical consumption data suggests most recipients are unlikely to use their full entitlement.
According to HLIB, actual BUDI95 usage between October 2025 and June 2026 showed that more than 99% of users consistently consumed less than 200 litres of RON95 per month.
This means the increase in the ceiling to 300 litres may provide a larger safety buffer for motorists without necessarily translating into a proportionate increase in subsidy expenditure.
HLIB also believes stronger-than-expected economic growth could partly compensate for any increase in subsidy spending through improved government revenue collection.
The research house expects Malaysia’s economy to expand by 5.3% in 2026, exceeding the government’s official growth forecast of between 4.0% and 5.0%.
E-Invoice Threshold Raised To RM3 Million
The government’s cost-of-living and business support package extends beyond fuel subsidies.
Anwar also announced an increase in the e-Invoice exemption threshold to businesses with annual sales of up to RM3 million, from RM1 million previously.
The measure significantly broadens the number of smaller businesses exempted from mandatory e-Invoice implementation and is aimed at reducing the compliance burden on micro, small and medium enterprises.
Microfinancing facilities will meanwhile be increased to RM6 billion from RM5 billion, alongside the introduction of a new RM200 million Madani Sejahtera Grant to support micro-entrepreneurs.
For education, the government will raise the allocation for school maintenance to RM1.5 billion from RM1 billion.
RM1 Billion For Public Healthcare Digitalisation
The Malaysian Communications and Multimedia Commission (MCMC) will also deploy RM1 billion to improve digital capabilities across the public healthcare system.
The initiative includes the rollout of Electronic Medical Records and improvements to internet connectivity across 150 hospitals and more than 2,000 public health clinics.
Separately, the government will introduce an “AI for the People” programme aimed at expanding artificial intelligence exposure among younger Malaysians.
Under the programme, 100,000 eligible youths aged between 18 and 30 will receive free three-month enterprise AI subscriptions after completing prescribed learning modules.
Taken together, the measures provide additional household and business support while expanding spending in education, digital healthcare and AI capabilities.
For the government’s fiscal position, however, the fuel subsidy changes will be the component to watch.
While HLIB’s maximum-case calculation suggests the higher quotas could carry a sizeable fiscal cost if fully utilised, actual BUDI95 consumption patterns indicate the eventual burden could be substantially below that theoretical ceiling.
