VETERAN economist Dr Yeah Kim Leng has cautioned that Malaysia’s fiscal health faces a significant setback due to the ballooning monthly fuel subsidy bill.
He estimates that maintaining current price ceilings for RON95 and diesel over the next nine months could widen the national fiscal deficit by 1.5 percentage points, potentially pushing it to 5% of gross domestic product.
“Since much of the deficit financing is likely through borrowings, the country’s debt will rise by an equivalent amount.
“This is deemed to be a significant deterioration of the country’s fiscal position, more so considering that the spending is on fuel consumption rather than on productive purposes such as infrastructure, healthcare and education,” said Yeah in an interview with The Star.
He argued that subsidies only mask inflation temporarily, urging a fairer model where households and businesses share costs if oil prices stay high.
“While it will keep a lid on inflation, a more prudent, sustainable approach is to share the fuel subsidy burden with households and businesses, especially if the world oil price level stays high for longer,” Yeah said.
The Sunway University economist noted that Malaysia’s status as a net energy exporter provides a vital cushion, as increased earnings from petroleum and gas exports help mitigate the impact of sudden supply disruptions or price spikes.
Highlighting Malaysia’s relative advantage, he observed: “Asean peers like Thailand, the Philippines, and Indonesia are more dependent on oil imports than Malaysia, increasing significantly their exposure to world oil supply shocks.” — March 14, 2026
Main photo credit: Bernama
