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The Ministry of Finance (MOF) has confirmed that formal guidance has been issued to all ministries and government agencies to review and reprioritise their operating expenditure in response to ongoing global supply chain disruptions and increasing subsidy obligations.
In a statement on Wednesday, the ministry said the move is part of a prudent fiscal management approach aimed at optimising government resources while ensuring continued support for the public.
It added that the adjustment of expenditure priorities is intended to maintain fiscal discipline without compromising essential public services or overall economic stability.
“The Ministry of Finance confirms that guidance has been issued to ministries and agencies to restructure operating expenditure priorities in line with the challenges of global supply chain disruptions and rising subsidy commitments. This measure is part of a prudent fiscal management approach to optimise government resources and ensure continued support for the people.
“The Ministry of Finance wishes to emphasise that expenditure adjustments will be made without affecting critical public services and economic stability,” it said.
Earlier, the Treasury under the MOF has ordered all ministries and government agencies to reduce operating expenditure as Malaysia faces mounting fiscal pressure linked to the ongoing conflict in West Asia and its impact on global energy markets.
In a directive issued today, Treasury Secretary-General Datuk Johan Mahmood Merican had said the National Budget Office has been instructed to reassess remaining allocations under Budget 2026 in light of worsening external economic conditions.
He said Budget 2026 had initially set aside RM15 billion for subsidies, reflecting a significant reduction compared with previous years, noting that fuel subsidies alone had reached RM38 billion in 2023.
However, he cautioned that total federal subsidy expenditure is now projected to surge to RM58.4 billion for the full year, driven by cascading effects from the Iran conflict and the broader global energy disruption.
He said all ministries, departments and agencies must urgently review and tighten remaining operational expenditure to contain rising costs and maintain fiscal discipline.
Among the measures outlined are reductions in salaries and allowances linked to unfilled posts, a 10 per cent cut in spending on services, supplies and assets, and a 20 per cent reduction in allocations for statutory bodies and government-guaranteed government-linked companies.
All ministries and agencies have been instructed to submit revised budget proposals to the National Budget Office by 15 May.
“As is well known, the geopolitical situation arising from the war in West Asia has led to restrictions in the Strait of Hormuz, triggering a sharp surge in crude oil prices.
“These external factors have increased logistics costs, which have a direct impact on the cost of living for Malaysians,” Johan said in the directive soon after a cabinet meeting today.
The directive comes amid growing concern over the spillover effects of global oil price volatility on domestic inflation, subsidy obligations and Malaysia’s broader fiscal sustainability. - April 29, 2026
