KUALA LUMPUR – A storm of discontent is brewing among Malaysia’s middle class, who are feeling the pinch of Prime Minister Anwar Ibrahim’s ambitious budget to bolster the incomes of the nation’s poorest and slash national debt, according to a report published on MSN.

2025 budget unveiled

Last week, Anwar unveiled a record-breaking budget for 2025, earmarking 421 billion ringgit (US$99.8 billion) to “raise the floor” for the country’s lowest income earners and “raise the ceiling” for Malaysia’s economic growth.

However, the decision to cut petrol subsidies for wealthier drivers and increase taxes to fund wage hikes for low earners has sparked outrage and anxiety among many Malaysians, particularly those in the top 15 per cent of income earners, known as the T15 group.

Households earning a combined monthly income of 13,295 ringgit (US$3,150) are classified as “T15” by Malaysian authorities – a group that includes the highest earners, who are expected to better absorb price hikes and subsidy cuts.

Criticisms

But social media is abuzz with criticism, with one user, Amirul Zamir, commenting on Facebook, “You should remove subsidies and raise taxes on those who earn over 50k a month. You can’t place the same bracket on people who earn 20k with those earning 200k a month.”

The government anticipates savings of about 8 billion ringgits by excluding the T15 from petrol subsidies, which are set to be reformed by mid-2025. Anwar has promised to maintain a 12 billion ringgit spend to subsidize the remaining 85 per cent of drivers nationwide.

Economy Minister Rafizi Ramli has warned of “choppy waters ahead” due to the petrol subsidy rollback, describing it as a “once-in-a-generation decision” crucial for narrowing the government’s fiscal deficit. Yet, some Malaysians accuse Anwar and his Pakatan Harapan coalition of reneging on earlier promises to lower fuel prices when they were in opposition.

The opposition has warned that the poor may ultimately bear the brunt of rising costs passed on by businesses, with former prime minister Muhyiddin Yassin suggesting that T15 business owners could shift their additional costs to consumers.

Push struggling MSEs to insolvency

Anwar’s administration has already weathered public backlash following subsidy cuts to electricity and chicken and eggs. The unity government suffered a by-election loss after diesel subsidy cuts took effect in June.

Local businesses are also voicing concerns about the potential need to close or downsize operations due to a minimum-wage increase and mandatory retirement fund contributions for foreign workers, set to be implemented next year.

The minimum wage will rise by 200 to 1,700 ringgit (US$403) a month from February. Small and medium enterprises (SMEs) fear that the extra costs could hinder their pandemic recovery and stifle innovation and expansion.

“The sharp rise in operational costs could push struggling SMEs into insolvency, leading to business closures and job losses,” warned Chin Chee Seong, president of the SME Association of Malaysia.

Other businesses are threatening to pass the wage increase onto consumers, who are already grappling with months of inflation. Childcare centres, for instance, are expected to raise prices by up to 30 per cent to cover higher salaries and the increased cost of food and teaching aids.

Step in the right direction?

Despite the backlash, beneficiaries of Anwar’s budget are welcoming the pay rise and the continued subsidies on essentials like petrol, education, and healthcare as a long-overdue recognition of hard times and economic disparities.

The minimum wage hike has been broadly welcomed as a means to keep pace with rising living costs for the lowest income earners, despite complaints from employers. “It is better for wages to go up slightly even if it makes goods more expensive compared to having expensive goods with low wages,” said retired professor Mohammad Jais Atan on Facebook.

Civil society groups focused on senior welfare have also applauded the expansion of welfare incentives for elderly care, with the government allocating 13 billion ringgit for nine million low-income individuals, plus a 1 billion ringgit allocation for monthly allowances and activity centres for the elderly.

The measures outlined in the budget have been described as a “small but well-considered step in the right direction” by a coalition of 14 senior welfare associations.