Diesel subsidy under BUDI Diesel to cost billions in 2026
The government expects to spend almost RM40 billion on petroleum subsidies in 2026 under the targeted BUDI Diesel programme, Deputy Finance Minister Liew Chin Tong told the Dewan Negara today.
Source: The Vibes · July 22, 2026 at 7:30 AM · AI-assisted report
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KUALA LUMPUR, 22 JULY 2026 —
The government expects to spend almost RM40 billion on petroleum subsidies in 2026 under the targeted BUDI Diesel programme, Deputy Finance Minister Liew Chin Tong told the Dewan Negara today.
Market Impact
Under the BUDI Diesel mechanism, the nationwide diesel price will be capped at RM2.10 per litre from July 1, 2026, with eligibility verified through MyKad. The programme is part of the MADANI Government’s subsidy reform to reduce wastage, misuse and smuggling while ensuring assistance reaches intended recipients.
Liew said the government had absorbed almost RM800 million monthly in subsidies for RON95 petrol and diesel in January and February 2026. By March and April, the monthly outlay surged to about RM5 billion amid higher global crude prices, before easing to around RM4 billion in May and June.
“If current market prices remain, the government is expected to bear almost RM40 billion in petroleum product subsidies for 2026, subject to global crude oil prices, currency movements and actual consumption patterns,” Liew said in a written parliamentary reply on Wednesday.
Petroleum subsidies are classified as operating expenditure and funded through government revenue, including tax and non-tax receipts. Liew noted that higher oil prices increase both subsidy costs and petroleum-related revenue.
“Every US$1 per barrel increase in global crude oil prices is estimated to generate around RM300 million in additional petroleum-related revenue for the Federal Government, excluding PETRONAS dividends,” he said.
The Ministry of Finance said the extra revenue would help offset part of the increased subsidy burden, with regular monitoring of collections to ensure federal spending does not significantly weaken the country’s fiscal position.
Related: Ministry of Finance (MOF) · Kuala Lumpur