The source with knowledge of the decision, which declined to be identified, said subsidies were raised at the start of the year to 54 Malaysian sen per kilo, or 18 US cents, from 20 sen to offset higher prices for imported sugar.

While Malaysia's sugar imports are tiny compared to the likes of China, higher prices directly hit the pocket books of Malaysians at a time when the government is aiming to create an economic feel-good factor ahead of the elections.

"Election time is coming up, they are giving more sweets to the masses," said James Chin, a political analyst at Monash University in Malaysia. "I don't think they are concerned about the fiscal deficit right now."

Najib is widely expected to call a general election in the first half of 2012, about a year before his current mandate ends, as he seeks to secure a second term before slowing global growth hurts Malaysia's trade-dependent economy.

His goal is to restore the two-thirds parliamentary majority that the ruling Barisan Nasional coalition lost in the 2008 elections, but that looks difficult to achieve against an opposition alliance that made historic gains four years ago.

The government recently handed out cash payments of 500 ringgit ($160) to households earning 3,000 ringgit or less per month, and increased pay and pensions for civil servants.

"Government expenditure for sugar will have to go up because there has been tightness in global supplies," the government source said. "The idea is to keep sugar prices stable and affordable for Malaysians."

Najib has pledged to cut subsidies in the long term, with the savings aimed at helping the lower income group who are mostly from his ethnic Malay voter base.

The government has been slowly reducing subsidies since June 2010 but subsidies on sugar rose at the end of that year, and now again in