Malaysia raises $1.5 bn in dollar bonds as fuel subsidy bill threatens to double

Malaysia issued its first dollar‑denominated bond sale in five years, raising US$1.5 billion through two sukuk tranches – an $850 million note due 2032 priced at 4.612% and a $650 million tranche due 2036 at 4.949%. The offering was oversubscribed by 4.7 times, allowing the government to tighten spreads to its tightest level ever, according to Finance Minister Amir Hamzah Azizan.

The proceeds are intended to fund infrastructure projects and refinance existing obligations while the country confronts a rapidly rising fuel‑subsidy cost. Deputy Finance Minister Liew Chin Tong warned that if crude oil stays around US$90 a barrel, monthly subsidies could reach RM2 billion for petrol and RM1.5 billion for diesel, pushing the annual subsidy bill toward RM40 billion – more than double the original allocation. Subsidy spending has already surged from RM700 million in January to a peak of RM7.5 billion in April, driven by higher global oil prices linked to the Middle‑East conflict. Malaysia’s GDP grew 5.8% YoY in the June quarter, but the expanding subsidy burden threatens to strain the fiscal deficit.