PUTRAJAYA, Jan 17 — Despite the view that subsidies are inefficient and prices of basic necessities should be determined by market forces, the Madani Government has chosen a more realistic approach by providing targeted subsidies to help households cope with cost-of-living pressures, said Treasury secretary-general Datuk Johan Mahmood Merican.
He said the subsidy rationalisation, such as for electricity and fuel, considers the people’s real needs instead of just following goals prescribed by economists or the World Bank that suggest subsidies should be given only to the poor.
He said the government is of the view that subsidies are not necessarily bad; instead, they serve as an important instrument to assist households if they are managed and targeted more effectively.
“The issue arises when blanket subsidies are implemented, as they lead to significant leakages — for example, when fuel is smuggled across borders,” he said in a recent interview with Bernama.
Johan pointed out that BUDI Madani and BUDI Madani RON95 not only tackle subsidy leakages but also generate savings, which are then channelled back into assisting the majority of Malaysians through the Sumbangan Asas Rahmah (SARA) and Sumbangan Tunai Rahmah (STR) programmes.
During the tabling of Budget 2026 last October, Prime Minister Datuk Seri Anwar Ibrahim announced that the government’s bold move to implement targeted and restructured subsidies had borne significant results, with total savings reaching RM15.5 billion.
Meanwhile, touching on the inflationary implications of the SARA and STR disbursements, Johan stressed that these measures do not create inflationary pressure, and has instead allowed the government to keep inflation under 2 per cent, demonstrating that subsidy programmes such as SARA do not contribute to widespread price hikes.
“This goes to show that targeted subsidies not only help those in need, but also promote price stability in the market,” he added.
Johan explained that unlike the approach taken by some other countries, where prices are raised to market levels and cash aid is then provided, the Malaysian government adopts a targeted approach to support vulnerable groups.
