ON THE 22nd Sep 25, Prime Minister Dato’ Seri Anwar Ibrahim, announced that Malaysia will transition to a targeted subsidy system for RON95 petrol, known as BUDI MADANI RON95 (BUDI95), effective 30th September 2025.
All Malaysian citizens with a valid driving license and a functioning Malaysian identification card will automatically be eligible, regardless of income level. Citizens are entitled to a monthly subsidised quota of up to 300 litres
The quota was determined based on Department of Statistics (DOSM) study, showing that over 99% of private vehicle users do not exceed this limit. Hence, the government is targeting 16 mil Malaysian users who are above 16 years old, have a functioning IC and valid driving license to benefit from this.
E-hailing drivers are exempted from this quota and may apply for additional allocations to support their livelihoods. The government has tweaked the RON95 subsidy to only allow Malaysians, irrespective of income, to enjoy the benefits.
On the other hand, foreigners are excluded and expected to pay market price at ~RM2.60/litre. Final market price will be announced in the following days ahead.
To support a relatively smooth and targeted approach, the government has structured the implementation into three stages. The first stage will start on 27th September for the armed forces and police, and the second stage will start on 28th September for Sumbangan Tunai Ramah recipients, which primarily targets the B40 households.
Lastly, full rollout will take place on 30th September to all 16 million households. For a seamless process, households do not need to register while petrol stations are expected to install MyKad readers at counters and fuel pumps.
Additionally, there will be online options available to check eligibility. During Budget 2025, the government planned to achieve savings of RM8 bil from the retargeting of RON95 petrol subsidy for 85-90% households.
However, due to the rising cost of living, the government has decided to target foreigners at this point, while allowing all Malaysians, irrespective of income, to enjoy further subsidy.
Assuming 16.3 mil users fully utilise 300 litres per month, the government will allocate up to an additional RM0.3 bil/month.
“Nevertheless, we think the government will maintain the 2025 fiscal deficit at 3.8% of GDP, narrower than the previous year of 4.1% of GDP due to savings from lower oil prices and stronger-than-expected Ringgit, as well as the previous SST expansion,” said Hong Leong Investment Bank.
The impact on inflation is expected to be disinflationary due to lower petrol prices for a median household (30th Sep onwards: RM1.99/litre; current: RM2.05/litre). Hence, taking into account the latest RON95 announcement, we lower our CPI forecast to 1.5% from 2.0%. —Sept 23, 2025
Main image: The Star
