By Remy Majangkim
KOTA KINABALU: We have a dangerous habit in Malaysia of treating the federal treasury like an endless forest, constantly chopping down reserves for short-term handouts while ignoring the growing mountain of national debt. We are giving away money we simply do not own, pretending the bill will never arrive.
With global crude oil prices volatile, economists are already gaming out a worst-case scenario: crude hitting US$160 per barrel.
For any driver at a Bornean fuel pump, the math is brutal. Under the current Automatic Pricing Mechanism, un-subsidised diesel, already at RM5.07 per litre, would easily blast past RM7.00. Filling a standard 70-litre tank would vanish nearly RM490 in a single click of the nozzle.
Putrajaya can try to mask the damage with targeted aid, but past the US$120 per barrel threshold, crude oil stops being just a market commodity and becomes a wrecking ball for consumer spending. We are looking at a textbook recipe for stagflation. As un-subsidised transport costs filter down the supply chain, the retail cost of everyday goods, from groceries to building materials,will inevitably march upward. Yet, wages remain anchored to the floor.
The average Sabahan will be forced to spend more just to survive, leaving next to nothing for discretionary spending. When retail cash dries up, local businesses stall, hiring freezes, and economic stagnation sets in.
Six years ago, during the peak of the pandemic, we were legally barred from leaving our houses. Today, a new global energy crisis threatens a different kind of lockdown: if crude oil surpasses US$160 per barrel, most regular families simply would not be able to afford to leave their homes anyway.
The standard political reflex to a crisis like this is predictable: widen the subsidy net. To keep diesel locked at RM2.10, Putrajaya would have to absorb a staggering RM4.90 subsidy for every single litre pumped. But funding a multi-billion-ringgit subsidy deficit on borrowed money is not social welfare. It is generational theft, compounding a debt mountain that already eats up massive chunks of our annual budget in interest payments alone.
However, enforcing a blunt “belt-tightening” policy triggers a glaring contradiction right here in East Malaysia.
There is a stark irony flowing through our pumps. Sabah and Sarawak are oil-producing states; our resources fuel the national treasury. Yet, due to decades of lagging infrastructure, our daily survival is uniquely dependent on diesel. Unlike the paved, rail-connected logistics networks of the Peninsula, the Bornean reality relies on heavy machinery, timber routes, and diesel-chugging 4x4s just to navigate unpaved rural roads.
Look no further than the Pan Borneo Highway saga. The Auditor-General’s Report 2/2026 exposed a massive structural hiccup in Sabah: RM10.547 billion of the allocated RM11.153 billion has been spent, yet only four out of 35 work packages under Phase 1 were officially completed and handed over by March. While state officials clarify that actual physical progress on remaining stretches is higher, tracking between 90% and 93%, the ground reality remains messy and incomplete.
Building a 706km highway network requires an army of heavy machinery and prime movers. In an environment where crude breaches US$120 and trends toward US$160, the diesel costs to finish our long-overdue infrastructure will skyrocket, feeding directly back into the stagnation loop.
This leaves policymakers in a chokehold. Axing subsidies entirely will paralyze the Pan Borneo Highway and punish rural Borneans who have zero alternative infrastructure. But keeping the subsidy tap open will bleed the federal treasury dry.
Hard times require hard choices, not populist band-aids. If we want a resilient economy, we have to endure the short-term sting of market realities, prioritize completing our core infrastructure, and aggressively pay down what we owe. The treasury forest is running thin. It is time to tighten our belts and face the music.
