KUALA LUMPUR, Malaysia — When Anwar Ibrahim came to power in late 2022, it was with the promise of reform: cleaner government, a leaner budget and a break from the patronage politics that had defined his predecessors.

Nearly three years later, not much of that has happened. His plans for targeted subsidies and reduced public spending have largely given way to quick fixes and political compromises.

The Malaysian prime minister on Wednesday unveiled a one-time stimulus package worth about 2.8 billion ringgit ($664 million) with cash handouts and lower fuel prices. He called it an “appreciation package,” but the timing is hard to ignore.

The announcement came just days ahead of a major protest on Saturday, where the opposition — rallying under “Turun Anwar” (Resign Anwar) — is calling for him to step down. They expect a turnout of over 100,000 people, though police estimate a smaller 10,000 to 15,000. It follows another protest earlier this month by hundreds of legal practitioners over alleged interference in the judiciary.

The protests and the government’s sudden turn toward populist spending point to a deeper tension in Anwar’s leadership: his effort to balance fiscal restraint with maintaining political support. Since taking office, Anwar has repeatedly said Malaysia needs to cut its $12 billion subsidy bill and bring down its fiscal deficit. Yet his latest actions are pulling in the opposite direction.

“There is a real risk that the government will announce policies that seem reactionary,” said Asrul Hadi Abdullah Sani, a partner at ADA Southeast Asia, a public affairs consultancy. “Such actions could undermine the administration’s fiscal credibility and derail its economic blueprint.”

Anwar holds a firm grip on power, with a strong parliamentary majority and a term that runs until the end of 2027. But analysts say rising public frustration is shaping up to be the toughest political challenge he’s faced since taking office.

“While Anwar’s position is secure, ongoing public backlash could threaten his chances for a second term,” Asrul Hadi said.

The Prime Minister’s Office didn’t immediately respond to a request for comment on Friday.

Anwar, at least publicly, has shrugged off the protests, telling Finance Ministry staff there is “no impact” and daring the opposition to bring a no-confidence vote — something they’ve yet to do.

His government has chalked up some achievements, including a record 378.5 billion ringgit in approved investments last year and a new special economic zone with Singapore designed to support future growth.

Higher deficit

The latest stimulus package is set to raise Malaysia’s fiscal deficit to 4.1% this year, above the government’s target of 3.8%, according to Kenanga Research. It may also derail a longer-term goal of cutting the deficit to 3.5% by 2027.

Anwar’s government has moved to tighten spending by cutting diesel subsidies and expanding the sales and service tax. But petrol subsidies remain politically sensitive. Despite earlier plans to limit fuel subsidies to lower-income groups, the price of RON95, the most popular grade, was recently lowered from 2.05 to 1.99 ringgit for all Malaysians.

“Net savings from the rationalization is expected to be limited,” Kenanga said. The government had estimated that reducing petrol subsidies would save it 8 billion ringgit a year.

Economists at CIMB Securities say the higher tax revenues and savings from diesel subsidy cuts previously announced could still be enough to offset the latest round of spending. Others warn that the bigger risk is whether the government will cave in and abandon its deficit goals entirely.

“The risk to the fiscal target is if the government later resets the target under political pressure from public backlash,” said Azizul Amiludin, a senior fellow at the Malaysian Institute of Economic Research.

Overspending could rattle investor confidence and push up debt costs, putting Malaysia’s top credit rating among emerging Southeast Asian economies at risk and with it, the country’s ambition to become a high-income, developed nation. For Anwar, it threatens not just his credibility but also exposes him to growing opposition attacks and adds strain to a fragile coalition held together by nearly 20 parties.

That pressure is building. Malaysia is navigating a difficult post-pandemic economy, while also negotiating to lower US tariffs on key exports. The latest cash aid may give domestic consumption a temporary boost, but with Anwar at the halfway point of his term, the room to make difficult decisions — such as on fuel subsidies — is quickly shrinking.

“From his national address it is clear that the government is already on campaign mode,” said Adib Zalkapli, founder of the geopolitical consultancy Viewfinder Global Affairs.

The protest set for Saturday in Kuala Lumpur is the first mass rally that directly challenges Anwar. Organized by the opposition party Parti Islam Se-Malaysia, it accuses him of unfulfilled campaign promises, mishandling the economy and showing authoritarian tendencies, including his controversial attempt to seek legal immunity from a sexual assault allegation.

The two-hour rally is expected to be led mostly by Anwar’s political rivals, including former Prime Ministers Mahathir Mohamad and Muhyiddin Yassin. A group of prominent non-governmental organizations on Friday distanced themselves from the event, saying they support institutional reforms but don’t endorse a mid-term change in government.

Authorities say they won’t block the rally. Roads will stay open, with several near the city center likely to be diverted. Still, the Attorney General’s Chambers on Wednesday warned civil servants not to take part — echoing the tactics of past administrations Anwar once fought against.

Civil rights groups quickly condemned the warning. “The Attorney General should respect and uphold the provisions of the Federal Constitution. It’s not the job of the AG to issue press statements defending the interests of the ruling political coalition, against whom the rally is targeted,” said Lawyers for Liberty, a group founded by activists who once marched alongside Anwar on the streets.

Anwar, for his part, defended the recent cash handouts, insisting they were part of a broader effort to ease economic strain. His political secretary denied the aid was a pre-election “goodie,” pointing instead to a rise in Anwar’s approval ratings reported by an independent pollster.

The opposition said the government’s cash handouts are a sign of pressure. Wan Ahmad Fayhsal Wan Ahmad Kamal, an opposition lawmaker, called the package a “reactionary” move that shows the administration is aware of the mounting public frustration.

He noted that Anwar, who spent more than two decades as Malaysia’s opposition figure and led multiple street protests for reforms, knows how demonstrations can sway public sentiment and challenge a government’s authority.

“We have given the government a chance of almost three years to do something, to deliver his promises, but he failed,” Wan Fayhsal said. “That’s why we want to hold him accountable.

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