Fuel subsidy costs surge to RM4.9 bln, construction projects remain unaffected

Amir (left) and Nanta (right) during a press conference following a briefing on diesel subsidy rationalisation held here on June 24, 2026.

By Amanda L

KUCHING, June 24: The government has acknowledged mounting fiscal pressure from fuel subsidy expenditure amid global oil shocks, while assuring that construction activities remain stable under existing contract frameworks.

Second Finance Minister Datuk Seri Amir Hamzah Azizan said Malaysia’s fuel subsidy bill has increased significantly in line with global oil price volatility, particularly during periods of geopolitical tension.

“Monthly subsidy expenditure, which stood at around RM800 million before recent conflicts has surged to between RM4.7 billion and RM4.9 billion during peak periods of global disruption.

“The sharp increase underscores the sensitivity of Malaysia’s fiscal position to external shocks, particularly developments in global energy markets,” he said during a press conference following a briefing on diesel subsidy rationalisation held here today.

He added that rising geopolitical instability has affected crude oil prices and disrupted supply chains, contributing to higher subsidy obligations.

Despite the fiscal pressure, Works Minister Datuk Seri Alexander Nanta Linggi said ongoing infrastructure projects remain largely unaffected, as most works continue under existing contract arrangements awarded through Letters of Acceptance (LOA).

He said while there is an increase in costs linked to fuel and logistics, particularly transportation of construction materials, the impact has not reached a level that disrupts project implementation.

“There are price increases, but they have not reached a point where projects cannot proceed. Most of the cost changes are still within manageable contract terms,” he said.

Nanta said the main cost pressure in the construction sector stems from logistics and transportation rather than sharp increases in core material prices such as cement.

He added that cement prices have remained relatively stable, while increases are more evident in haulage, aggregates and other supply chain-related costs.

According to him, the government is monitoring the situation in coordination with the Ministry of Finance (MOF), but no major intervention is required at this stage as contractors are still able to absorb the cost fluctuations.

The MOF said Malaysia will continue to balance fiscal sustainability with development continuity, particularly in managing subsidy exposure while ensuring infrastructure projects are not adversely affected. — DayakDaily