KUALA LUMPUR (April 29): Malaysia has instructed government ministries to cut their operating expenditures as the country continues to grapple with the impact of the Middle East conflict.

All ministries have received notification from the Ministry of Finance (MOF) on adjustments to operating expenditure, government spokesperson Datuk Fahmi Fadzil told the media at a weekly news conference on Wednesday.

This is in line with the government’s efforts to streamline programmes and activities as Malaysia faces global economic challenges stemming from tensions in the Middle East, Fahmi said.

Further details will be coordinated by each ministry’s secretary-general together with Chief Secretary to the Government Tan Sri Shamsul Azri Abu Bakar and Treasury secretary-general Datuk Johan Mahmood Merican.

All ministries, departments, and agencies have been told to review their spending and propose budget cuts by May 15, according to a Reuters report earlier today, citing a government directive. The directive proposed several cost-saving measures including restrictions on salaries and allowances for unfilled vacancies, a 10% reduction on services, supplies and assets, and a 20% cut on budgets for statutory bodies and companies limited by guarantees.

The MOF in mid-April said fuel subsidies have cost the national coffers roughly RM7 billion a month, a tenfold increase from about RM700 million monthly before the US-Iran war disrupted the Strait of Hormuz.

Of the RM7 billion, the monthly subsidy bill for RON95 fuel has surged from RM300 million before the conflict in the Middle East to RM4 billion currently. Diesel subsidies, including those for farmers and fishermen as well as logistics to keep essential food prices low, have increased from RM400 million per month to RM3 billion per month.

On Wednesday, Fahmi, who is also the communications minister, said the government is also reviewing the RON95 and diesel subsidy programmes “to be aligned” but did not elaborate further.

He also noted that the government is studying a more targeted subsidy mechanism for the diesel subsidy programme in East Malaysia, where locals still enjoy the subsidised diesel price of RM2.15 per litre.

“What is being discussed is a more targeted mechanism, like Budi 95. This is under study and will be implemented by the MOF,” he said.

Nevertheless, Fahmi reassured that fuel supply for the coming months, particularly May and June, remains adequate with no immediate concerns, including for Petroliam Nasional Bhd (PETRONAS).

He also stressed that the government has no plan to re-table the budget for the year in Parliament.

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