KUALA LUMPUR, 2 September 2025 – Malaysia’s Finance Minister II, Datuk Seri Amir Hamzah Azizan, affirmed that the government remains steadfast in expanding fiscal space through decisive reforms—most notably tightening Sales and Services Tax (SST) and rolling out targeted subsidies to safeguard finances and support economic growth.
Speaking in Parliament’s Dewan Negara, Amir Hamzah offered insights into fiscal changes embedded within Budget 2025. He highlighted the medium-term revenue strategy (MTRS), aimed at bolstering revenue collection and optimising public expenditure to buffer the economy from global shocks.
Expanding SST and Rationalising Subsidies
In a bid to narrow the wealth gap, Malaysia initiated a phased expansion of SST as of 1 July 2025—encompassing non-essential imported luxury items and new service sectors such as fee-based financial services.
At the same time, the government is replacing costly blanket fuel subsidies with a targeted two-tier system for diesel and RON95 petrol. Eligibility is being refined using precise mechanisms—MyKad-based readers linked to a live PADU central database, complemented by e-wallet and oil company app options. Details are expected to be fully rolled out by end-September.
To prevent abuse, a quota system will be applied at fuel stations—standard allocations for most motorists, with higher allowances for ride-hailing drivers.
Achieving Fiscal Resilience through Balance
These measures are positioned to unlock greater fiscal flexibility, enabling funds to be directed toward social welfare, infrastructure, healthcare, and public transport. The cabinet’s fiscal discipline has visibly reduced Malaysia’s deficit from 5.5% in 2022 to 4.1% in 2024, even as government debt hovers at 63.9% of GDP by mid-2025—slightly lower than previous year.
Regional Context: A Model for Inclusive Reform
Malaysia’s targeted approach provides a compelling blueprint for Southeast Asia: achieving fiscal restraint without sacrificing inclusivity. By leveraging technology and data-driven tools, these reforms allow for nuanced, equitable redistribution—offering lessons for countries like Indonesia and Thailand that face subsidy burdens amid limited fiscal space.
