Government May Restructure National Expenditure, Says Economy Minister

KUALA LUMPUR — The government is not ruling out the possibility of restructuring national expenditure following the fuel subsidy burden that has now reached RM5 billion per month due to the global energy crisis triggered by the blockade in the Strait of Hormuz.

Economy Minister Akmal Nasrullah Mohd Nasir said the move is essential to prevent this year’s fiscal deficit from widening beyond the targeted level. The current situation has also compelled the government to review fuel subsidy allocations and implement rationalisation of operational spending.

“The government is accelerating the shift to a more efficient targeted subsidy mechanism. This step is vital to ensure public funds are used optimally while easing the country’s financial burden caused by the sharp rise in global crude oil prices,” he told Sinar Harian.

He stressed that any restructuring will be carried out carefully and in a targeted manner so as not to disrupt the momentum of the domestic economy. This strategic approach is necessary to strengthen the country’s fiscal space, safeguard the people’s well-being, and enhance economic resilience amid global uncertainties.

Akmal Nasrullah added that the government continuously reviews national spending priorities based on the current fiscal position, developments in the global and domestic economy, and the evolving needs of the people.

“In facing global economic uncertainty, inflationary pressure, geopolitical conflicts and rising costs of project implementation, the approach of restructuring or reprioritising expenditure is important to ensure the country’s financial resources are directed towards critical programmes and projects that deliver high impact to the people and the national economy,” he said.

Spending priorities will continue to focus on programmes and projects that matter most to the people’s well-being, economic growth and national resilience — including basic amenities, critical infrastructure, healthcare, education, food security, flood mitigation, public transport and the digitalisation of government services.

At the same time, the government will ensure the continuity of physical development and infrastructure projects that directly contribute to national economic growth. Emphasis will be placed on projects that are ready for immediate implementation, people-oriented and capable of stimulating economic activity.

On sectors hardest hit by the crisis, Akmal Nasrullah identified three key industries: agriculture, manufacturing and services. Agricultural input costs have risen due to higher prices of fertiliser and animal feed, while the manufacturing sector is affected by supply chain disruptions and a sharp increase in logistics and insurance costs (transport costs have nearly doubled, with insurance premiums for a single voyage rising up to 16 times).

He also noted that micro, small and medium enterprises (MSMEs) are facing sudden surges in operating costs, according to the latest study by the Federation of Malaysian Manufacturers (FMM).

To ensure energy supply security if the crisis persists, Petronas has activated a diversification strategy by sourcing crude oil and petroleum products from various regions including South America, West Africa and Central Asian countries such as Turkmenistan and Uzbekistan. The government is also holding Government-to-Government (G2G) discussions with Australia for phosphate and fertiliser supplies, and with China for resin and naphtha to support the country’s medical device industry.

Akmal Nasrullah emphasised that the government will continue to monitor the situation closely and is prepared to take appropriate measures to protect the people’s well-being and stabilise the national economy. The government is also conducting daily monitoring through the Global Supply Crisis Monitoring Dashboard, which tracks Brent crude oil prices, LNG, exchange rates and international supply chain developments.

This report is compiled based on the Economy Minister’s official statements and The Star’s coverage.