Malaysia to charge foreigners full price for fuel in major subsidy overhaul

KUALA LUMPUR, Malaysia — Prime Minister Anwar Ibrahim announced a shift in Malaysia’s fuel policy that will end gasoline subsidies for foreigners, requiring them to pay market prices for RON95 petrol.

Under the new regulations, Malaysian citizens will continue to receive a subsidized rate of 1.99 RM per liter, capped at 300 liters per month. Foreigners must now pay the unsubsidized market price of approximately 2.60 RM per liter for the same fuel grade.

Vehicles registered outside of Malaysia are required to use premium RON97 petrol, which currently costs 3.10 RM per liter.

The government expects the policy to save 2.5 billion RM in 2026 by reducing "subsidy leakage" and curbing smuggling operations into neighboring countries. Anwar, who also serves as the nation’s finance minister, praised the public for their "vigilance" in reporting foreigners attempting to purchase subsidized fuel.

The move replaces an earlier proposal to cut subsidies for the top 15% of earners, a measure that would have saved an estimated 8 billion RM annually. The government abandoned that plan due to concerns over rising cost-of-living pressures.

The Malaysian government’s latest pivot on subsidy reform serves as a textbook study in the calibration of economic efficiency against political viability. By retreating from an ambitious income-based overhaul in favor of a universal model that specifically excludes foreign nationals, Prime Minister Anwar Ibrahim’s administration has made a calculated bet on political pragmatism.

While an income-contingent reform remains the most equitable and fiscally potent path in theory—with potential savings estimated at RM 8 billion—the operational complexities and the risk of a backlash from the middle class, civil servants, and the rural electorate proved too high a hurdle. Instead, the administration has opted for a path of least resistance: targeting "outsiders" and cross-border smuggling.

This strategy allows the government to frame the reform through a populist lens, presenting the measure as a defense of national resources against foreign exploitation rather than a reduction in domestic entitlements. By invoking national pride and calling for civic vigilance, the administration has crafted a narrative that is far more palatable to the domestic base than a complex means-testing system that would inevitably strip benefits from some Malaysian citizens.

However, this political insulation comes at a steep fiscal price. By settling for a projected RM 2.5 billion in savings—less than a third of the potential RM 8 billion—Kuala Lumpur has signaled that it prizes immediate social stability over long-term fiscal discipline. Ultimately, Malaysia’s compromise highlights a broader global challenge: dismantling universal subsidies remains a volatile endeavor for any government, particularly as the rising cost of living continues to heighten political sensitivities.

This policy will not directly affect the Vietnamese-American community. However, it will impact members of the diaspora currently living, working, or traveling in Malaysia. Those operating locally registered vehicles there can expect to see a rise in their fuel expenses.