Malaysia PM announces cash aid, fuel price cut to address rising living costs

Highlights:

• All adult Malaysians to receive one-off cash aid
• RON95 fuel subsidy changes expected by end-Sept
• Further measures to aid poor to be announced on Thursday
• Analysts say subsidy plan changes could impact fiscal plans

Malaysia's Prime Minister Anwar Ibrahim announced new measures on Wednesday to address growing public disquiet about the rising cost of living, including a cash handout for all adult citizens and a promise to lower fuel prices.

His statement in a televised broadcast came ahead of a planned protest to be held in Malaysia's capital Kuala Lumpur on Saturday, aimed at forcing Anwar to step down over escalating prices and a failure to deliver on promised reforms.

Anwar's administration has carried out a number of measures to boost revenue and productivity this year, including a minimum wage hike, increased electricity tariffs on heavy power users and an expanded sales and services tax.

Anwar has said the moves were mainly targeted at large businesses and the wealthy, but critics have voiced fears that higher costs would eventually be passed down to consumers, including lower and middle-income earners.

On Wednesday, Anwar said all Malaysians above 18 will receive 100 ringgit ($23.67) in a one-off cash handout to be disbursed from August 31.

The government will spend a total 15 billion ringgit ($3.55 billion) in cash aid in 2025, up from 13 billion ringgit originally allocated for the year, he said.

Police have said they expect between 10,000 and 15,000 people to attend Saturday's protest, which has been organised by opposition parties.

"I acknowledge the complaints and accept that the cost of living remains a challenge that must be addressed, even though we have announced various measures thus far," Anwar said, adding that more initiatives to aid those in poverty will be launched on Thursday.

Anwar said the government will also announce details of a long-awaited plan to adjust blanket subsidies on the widely used RON95 transport fuel before the end of September.

Once the subsidy changes are implemented, Malaysians will see fuel prices at the pump drop to 1.99 ringgit per litre, compared to the current price of 2.05 ringgit, Anwar said.

Foreign nationals however will have to pay unsubsidised market prices for the fuel, he said. Anwar did not provide details on how the measure will be enforced.

Analysts say changes to the fuel subsidy rationalisation scheme - originally set for mid-2025 and aimed at also removing subsidies for the wealthy - could affect Malaysia's fiscal consolidation plans.

Kenanga Investment Bank economist Muhammad Saifuddin Sapuan said the cash handout and subsidy measures were necessary to boost domestic demand, amid external headwinds arising from ongoing global uncertainty.

"Nevertheless, this comes at a cost, especially on how the government will finance it, and likely put pressure on its fiscal target," he said.

Kathleen Chen, of Fitch Ratings' Sovereigns team, said further delays or insufficient progress on subsidy rationalisation could jeopardise the government's goal to reduce its deficit to 3% by 2028.

Fitch expects Malaysia's general government debt to remain high, at around 76.5% of GDP in 2025, with only a gradual decline in the medium term, she said.