KUALA LUMPUR, Malaysia — Prime Minister Anwar Ibrahim revealed on Friday a comprehensive national budget for 2025, which includes increased taxation and restructured gasoline and education subsidies aimed at addressing the country’s fiscal deficit. This initiative is a part of a broader reform strategy intended to streamline Malaysia’s financial operations.

Anwar reported in Parliament that Malaysia allocates approximately 80 billion ringgit (equivalent to $18 billion) each year for various forms of subsidies, grants, and financial assistance. A significant portion of this—around 25%—is used to subsidize the commonly utilized RON95 gasoline. He noted that the country’s tax revenue remains notably low, at under 13% of its GDP, highlighting the urgency for reform.

He stated, “Our current system provides widespread subsidies across fuel, electricity, water, education, and health services, as well as fundamental goods like chicken. However, this model is unsustainable when paired with our high debt levels and minimal revenue generation.” Furthermore, he indicated that the upcoming fiscal reforms would take a more assertive approach, with a focus on expanding tax revenues and targeting subsidies to those who need them most.

The planned restructuring of subsidies is a critical aspect of the economic reforms that Anwar committed to when he assumed office in 2022. These measures aim to save the government substantial amounts each year, rectify economic imbalances, and pave the way for a more sustainable economic future. Earlier this year, the government had initiated targeted subsidies for diesel and electricity, revised water tariffs, and eliminated chicken subsidies.

Anwar mentioned that from mid-2025 onwards, targeted gasoline subsidies will be introduced, which could save the government about 8 billion ringgit ($1.9 billion) annually, as wealthier individuals and foreigners would be excluded from these subsidies. Although specifics have yet to be disclosed, Anwar assured that the majority of the Malaysian populace would remain unaffected.

Additionally, changes will be made to the scholarships for government boarding schools, requiring families with greater wealth to contribute more toward their children’s education, reinforcing the government’s commitment to financial equity.

This initiative is anticipated to reduce the fiscal deficit from an estimated 4.3% this year to 3.8% of GDP in the upcoming year. Despite potential backlash from lower-income voters grappling with the increasing cost of living, Anwar has capitalized on stronger economic growth this year. He forecasted a projected economic growth rate between 4.5% and 5.5% next year, improved from an estimated 4.8% to 5.3% this year.

In unveiling a record budget of 421 billion ringgit ($98 billion), a 3.3% increase from the previous year, Anwar aims to stimulate the economy and enhance infrastructure and industrial growth. Sectors such as education, healthcare, and security are earmarked as major beneficiaries, collectively representing about one-third of total spending.

To improve government revenue, Anwar shared plans to progressively broaden a sales and services tax, increase taxes on sugary beverages as part of a nationwide initiative, and enforce taxation on share dividends. Moreover, he unveiled an increase in cash assistance for low-income families and announced a 13% raise in the national minimum wage to 1,700 ringgit ($395) starting in February. He emphasized that only when the citizens of Malaysia experience higher income levels can the reforms be regarded as successful.

Anwar confirmed his commitment to public service by opting not to take a salary, while also maintaining a 20% pay cut for Cabinet ministers.