As Malaysia’s Budget 2025 approaches, there is growing speculation that food subsidy cuts may be on the table, particularly for eggs. While fuel subsidy rationalization is expected to take center stage, food-related subsidies might also be trimmed as the government seeks to manage its enormous subsidy bill.
Despite the small share of food subsidies compared to fuel, the government has emphasized the need for targeted subsidies. Economists note that while savings from food subsidy cuts would be minimal, it may be a first step toward broader subsidy reforms. Food subsidies for items such as cooking oil, rice, and eggs currently account for RM3.18 billion of the RM52.8 billion in subsidies and social assistance allocated for 2024.
Eggs, which receive a 10 sen subsidy per egg, amounting to around RM100 million, are a prime candidate for subsidy cuts. Economists suggest that allowing market forces to set egg prices could stabilize costs, similar to the approach taken for chicken meat after its price ceiling was removed in late 2023.
Other potential subsidy reforms could involve sugar and flour, both of which are currently controlled. Sugar subsidies were removed in 2013 but have seen temporary incentives reintroduced to help refiners cope with rising costs.
As Malaysia aims to reduce its fiscal deficit to 3.5% of GDP, any food subsidy cuts would need to be carefully managed to avoid significant impacts on the cost of living. Economists expect any subsidy cuts to be sequenced with mitigation measures to minimize inflationary pressures.
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