KUALA LUMPUR (Oct 9): The government expects its subsidies and social assistance bill to fall to RM72.73 billion in 2027, down from RM74.47 billion in 2026. However, the allocation remains well above the RM55.27 billion recorded in 2025.
The government revised its 2026 subsidy and social assistance allocation up 34.7% from 2025, mainly due to the sharp rise in fuel subsidy spending this year, according to the Ministry of Finance's (MOF) latest Fiscal Outlook and Federal Government Revenue Estimates report.
BIMB Research recently said Malaysia’s fuel subsidy bill could swell to as much as RM52 billion this year amid higher global energy prices. Brent crude swung back above US$105 per barrel on Thursday.
To control costs, the government temporarily cut the Budi95 RON95 quota to 200 litres a month from April to September, while standardising Budi Diesel nationwide in July.
The Budi95 quota was restored to 300 litres from Sept 1 as domestic energy supply conditions improved.
Savings from targeted subsidies are expected to reduce subsidy and social assistance spending by 2.3% in 2027, but it will still make up 19.3% of the RM376.84 billion operating budget, making it the second-largest expense after salaries.
For 2027, the government expects modest savings from the continued implementation of Budi95 and Budi Diesel, alongside the nationwide rollout of the Electronic Cooking Oil Subsidy System (eCOSS). The measures are aimed at reducing subsidy leakages and ensuring subsidised fuel and goods reach eligible recipients.
The government said fiscal resources will continue to be allocated prudently and prioritised towards programmes with high economic and social returns.
Overall government spending is expected to reach RM459.8 billion in 2027, with RM376.84 billion, or 82%, allocated for operating expenditure and RM83 billion, or 18%, for development spending.