Budget 2026: Budi95 crucial, but may not be sustainable without long-term transport solutions
SHAH ALAM - As Malaysians adjust to the introduction of Budi95, economists caution that while the subsidy offers much-needed relief, it may not be sustainable in the long term.
They argued that Budget 2026 must balance immediate support with strategies that reduce reliance on fuel subsidies through better public transport, incentives for young car buyers and preparation for broader electric vehicles (EV) adoption.
Bank Muamalat Malaysia Bhd's chief economist Dr Mohd Afzanizam Abdul Rashid said the government’s approach to subsidy rationalisation remained cautious and targeted.
“The introduction of Budi95 raises questions about whether it might increase Malaysians’ reliance on petrol cars. The government’s approach, however, appears to be gradual and targeted.
“This round of rationalisation focuses on ensuring that only Malaysians benefit from subsidies, while excluding non-citizens and large corporations. A notable feature of this initiative is the use of MyKad as a tool for policy delivery, reflecting efforts to make better use of its technology.
“The success of previous measures such as the Sumbangan Asas Rahmah (Sara) shows how this system can be effective and the government is now applying it to fuel subsidies with hopes of refining rationalisation efforts in the future,” he said in an interview with Sinar Daily.
He recognised that the RM1.99 per litre subsidy provides households with instant relief, but cautioned about the risks tied to fluctuating global fuel prices. Afzanizam pointed out that while the subsidy eases the burden in the short term, its long-term sustainability is still uncertain.
He also explained that crude oil prices are highly volatile, often swayed by unexpected shocks and geopolitical tensions, especially in the Middle East.
“At present, with Brent crude hovering below USD $70 per barrel, the government’s subsidy burden is relatively manageable.
“Nonetheless, authorities continue to take a cautious and gradual approach, balancing fiscal discipline with the need to avoid sudden shocks to the economy, particularly those that would worsen the cost of living,” he added.
Afzanizam also highlighted structural challenges, explaining that car ownership in Malaysia is still seen as unavoidable because of weaknesses in the public transport system.
He said owning a car remains a necessity and while Budget 2026 could introduce relief measures such as reduced excise duties, tax incentives or more affordable insurance for young buyers, the government’s limited revenue leaves little room to manoeuvre.
“With Malaysia’s tax-to-GDP ratio standing at just over 12 per cent, below the global benchmark of 15 per cent, there is little room for new incentives. If measures are introduced, they are more likely to favour the M40 category through targeted tax relief,” he said.
Universiti Putra Malaysia economist Associate Professor Dr Ahmed Razman Abdul Latiff said Budi95 is essential for many Malaysians who have limited alternatives to petrol-powered cars.
He views the subsidy as crucial support for those who depend on private vehicles for their daily commute, as electric vehicles remain out of reach for many and public transport in some areas is still far from reliable.
“The government’s role should be to keep improving and expanding the public transport network and infrastructure, while also preparing the ground for broader EV adoption in the future.
“The RM1.99 per litre subsidy is much-needed right now, but in the long run, it may not be sustainable because of global fuel price volatility. That is why I believe we need a more sustainable fiscal approach.
“Once the Central Database Hub (Padu) database is fully in place, the subsidy can become more targeted, ensuring that only those who really need it receive the benefit, while reducing unnecessary fiscal pressure,” he told Sinar Daily.
Looking toward Budget 2026, Razman highlighted the need for a balanced approach. He believes the government should adopt multipronged solutions, supporting EV owners, improving public transport and providing incentives for new and young car buyers.
At the same time, he cautioned that these policies must be crafted carefully to avoid placing too much strain on government revenue.
The Finance Ministry (MOF) announced that Budget 2026 would be tabled in Parliament on Oct 10.
It will be the fourth in a series of Madani budgets and the first under the 13th Malaysia Plan (2026–2030).
MOF said the budget would balance short-term challenges with long-term reforms, emphasising targeted and outcome-driven assistance to improve quality of life.
It reaffirmed the three pillars of the Madani Economy: raising the ceiling of national growth, raising the floor of living standards and driving reform with a focus on good governance.
The ministry stressed that the budget would adopt a bottom-up, people-centred approach by incorporating feedback from communities, businesses and stakeholders to ensure policies reflect real conditions on the ground.
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