Malaysia Cuts Ministry Budgets to Fund Energy Subsidies

The Ministry of Finance of Malaysia ordered all federal ministries, departments, and agencies to reduce their 2026 operating budgets to offset rising energy prices and subsidy costs. Treasury Secretary-General Johan Mahmood Merican issued a directive on April 29 requiring spending cut proposals by May 15, targeting approximately RM10 billion in reductions. The Health Ministry faces a RM3.06 billion cut, while the Higher Education Ministry faces a RM2.39 billion reduction.

These measures respond to a projected surge in public subsidy costs, which are expected to reach RM58.4 billion this year, far exceeding the original RM15 billion allocation. The fiscal pressure stems from global oil supply disruptions linked to the US-Israeli war on Iran. To maintain domestic fuel supplies, Petronas is absorbing approximately RM650 million per month as a stabilizing agent.

Government officials stated the cuts target non-critical items, including postponed events, limited overseas travel, and delayed recruitment. Communications Minister Fahmi Fadzil confirmed the measures and noted there are currently no plans to re-submit the 2026 budget to parliament. Putrajaya is also reviewing subsidy mechanisms to transition toward more targeted fuel support, aligning with similar energy-saving directives seen in Thailand, Vietnam, Indonesia, and the Philippines.