20/04/2026

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MONDAY | APR 20, 2026

Support for targeted diesel subsidy

for natural rubber latex as a viable alternative,“ it said. However, Margma noted that rubber prices will continue to track regional futures markets and the ringgit’s performance, while geo political tensions in West Asia remain a key risk. “The conflict has already significantly impacted the glove industry supply chain, with raw material availability, rising fuel charges as well as higher shipping freight and insurance costs,“ it added. On a Friday-to-Friday basis, the Malaysian Rubber Board’s reference price for SMR 20 fell 19.5 sen to 803.5 sen per kg while latex in bulk increased 8.5 sen to 768 sen per kg. – Bernama This comes against a backdrop of elevated global oil price volatility and rising fiscal pressures, with fuel subsidies historically forming a significant and unpredictable com ponent of government expenditure. At the same time, the government is advancing complementary mea sures, including increasing biodiesel blending rates from B10 to B15, as part of broader efforts to strengthen energy resilience and improve subsidy efficiency. our project sites.” Independent macro strategist Suresh Rama said that it is a good idea, given the fact that transport and logistics play an important role in contributing to the economy. “My concern is whether it is fiscally sustainable given that the consumption of diesel is large in the transport sector. We may be forced to adjust upwards our fiscal deficit target for this year, but it will not likely be drastic given high oil prices are also beneficial to our revenue stream since we do export crude oil,” he said. “I don’t see it as a permanent feature, a retargeted diesel subsidy, but it will help mitigate the current sporadic shortages of diesel in certain petrol kiosks.” The move, ordered by Prime Minister Datuk Seri Anwar Ibrahim, comes amid heightened concerns over subsidy leakages and smuggling, with the Finance Ministry tasked to review the mechanism and table its findings as early as this week. Authorities have deployed enforcement personnel at more than 150 high-risk petrol stations nationwide following abnormally high fuel sales, while recent reports indicate syndicates have shifted tactics by sourcing subsidised diesel through intermediaries, including local fishermen. A shift towards a Budi95-style mechanism would change how diesel subsidies are delivered, moving away from the current cash-based assis tance under schemes such as Budi Individu towards a more targeted, consumption-linked system.

o Economists welcome government’s proposal, say such an approach will enhance fiscal efficiency, curb leakages and contain inflationary pressures

Ű BY HAYATUN RAZAK sunbiz@thesundaily.com

fiscal leakages, improves expenditure efficiency and enhances budget predictability. This creates additional fiscal space that can be redeployed towards productivity-enhancing investments or social protection, while also supporting Malaysia’s medium-term fiscal consolidation path and debt dynamics.” Imran stated that the reform is a positive step towards long-term efficiency, as a targeted approach would enhance equity and promote more efficient energy use, thereby supporting Malaysia’s broader structural goals such as the energy transition and subsidy rationalisation. “However, the success of the policy will hinge on the robustness of the targeting mechanism, admini strative capacity, and the govern ment’s ability to minimise exclusion and inclusion errors. Clear com munication and gradual imple mentation will also be critical to maintaining public acceptance and avoiding unintended disruptions,” he said. “Overall, even though some temporary price increases are un avoidable, a properly implemented targeted subsidy plan should ultimately make the economy stronger, improve how policies work, and help keep inflation expectations stable in the medium term.” IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said in an environment where every ringgit of public spending matters, the government’s move to study a targeted diesel subsidy mechanism, such as Budi95, is a timely and necessary policy reset rather than just another reform exercise. “At its core, the shift tackles two structural issues head on. First, it aims to plug longstanding leakage embedded in blanket subsidy

PETALING JAYA: Economists back the government’s proposal on targeted diesel subsidies to curb leakages and improve government spending efficiency as Malaysia moves to tighten the system using a Budi95-style approach. BIMB Securities Sdn Bhd chief economist Imran Nurginias Ibrahim said the proposed diesel subsidy targeting, similar to Budi95, signals a shift towards more disciplined and efficient fiscal management, al though its macroeconomic and distributional implications will depend heavily on execution. “From a macroeconomic pers pective, better-targeted subsidies are broadly positive, as they reduce leakages and improve resource allocation without materially sup pressing aggregate demand,” he told SunBiz . He said by narrowing eligibility to genuinely vulnerable groups and key sectors, the policy helps contain excessive fuel consumption and limits distortions in relative prices. “At the same time, while there may be some near-term cost pass through, particularly in logistics and transport, the targeted nature of the policy should help contain broader inflationary pressures.” Imran said the government retains flexibility to calibrate support and cushion second-round effects, thereby preventing a more persistent inflation spiral. In terms of fiscal sustainability, he said the reform is clearly constructive as fuel subsidies have historically been a significant and volatile component of government expendi ture, particularly during periods of elevated global oil prices. “A more targeted system reduces

An economist says a targeted approach will enhance equity and promote more efficient energy use. – BERNAMAPIC

geting precision, database integrity, and enforcement, will be decisive. “Ultimately, this strengthens Malaysia’s ability to contain leakages, manage inflation risks, and preserve fiscal space in an increasingly volatile global landscape.” According to Universiti Tunku Abdul Rahman professor Chia Fah Choy, the Finance Ministry’s review is likely to lead to a more integrated and digital mechanism. “By reducing the lag associated with manual cash transfers and moving toward a real-time verifi cation system, the government can create a more responsive operating environment. For the construction sector, this kind of digitalisation aligns with ongoing efforts to improve data tracking, fuel manage ment, and cost transparency,” he said. “We will be watching the details of the proposed Budi Diesel integration, and we hope the final framework will streamline claims for logistics pro viders and contractors who support

Meanwhile, the rubber market is expected to be quiet with a tendency to move sideways and lower this week, said industry expert Denis Low. Low said ongoing geopolitical tensions remain a key overhang on sentiment as uncertainty sur rounding the ceasefire could prolong the conflict and weigh on global demand. He noted that while supply conditions are mixed, wintering in some rubber-producing regions has been more severe and is expected to persist until mid- to end-May, although certain areas have begun to see improved latex yields. systems that disproportionately benefit unintended segments. “Second, it seeks to shield con sumers from cost-push inflation, given diesel’s critical role across logistics and supply chains where price shocks can quickly cascade into broader consumer prices,” he said. In his view, this marks a more calibrated approach that balances fiscal consolidation with price stability, ensuring support remains where it is most needed without distorting market signals. “From a fiscal sustainability pers pective, targeted subsidies enable more disciplined and responsive expenditure management, parti cularly in a high oil price environ ment, while reinforcing policy credibility among investors.” Mohd Sedek said the impact should become more visible over the next two to three years, as the reform improves allocative efficiency by reducing distortions and encouraging more rational energy consumption, although execution, especially tar

CPO futures expected to stabilise, rubber seen range-bound KUALA LUMPUR: Crude palm oil (CPO) futures on Bursa Malaysia Derivatives are expected to see stabilisation with a bearish bias this week, amid ample supply and easing energy prices. The market continues to take cues from energy prices, with speculators likely to take profits after the recent uptrend. The physical CPO price for April South dropped RM120 to RM4,460 per tonne. “Generally, judging by the price movement of both wet and dry rubber, it can be seen that demand for dry rubber is taking its own pace and not much volatility is expected,“ he added.

Teh added that supply conditions remain ample in both Malaysia and Indonesia, with no immediate concerns over shortages, while demand is expected to be driven by key importing countries such as China, India, Pakistan, as well as several Middle Eastern and European Union markets. On a Friday-to-Friday basis, the May 2026 contract fell RM114 to RM4,386 per tonne, June 2026 declined RM116 to RM4,422 and July 2026 was RM101 lower at RM4,450. Weekly trading volume increased to 429,556 lots from 391,313 lots.

Low said demand for wet rubber latex has strengthened, driven by glove manufacturers switching from synthetic to natural rubber due to tighter supply of feedstock such as naphtha and butadiene. Meanwhile, the Malaysian Rubber Glove Manufacturers Association (Margma) said the rubber market may trade upward this week, supported by stronger demand for natural rubber latex. “The current shortage of nitrile butadiene rubber is driving demand

Interband Group of Companies senior palm oil trader Jim Teh said CPO prices are likely to move within a narrower range as crude oil prices ease amid improving geopolitical developments. “CPO prices will sort of stabilise in the sense that energy prices are coming down because of the United States-Iran situation moving towards negotiations,” he told Bernama. He said the futures market is expected to trade between RM4,200 and RM4,350 this week.