KUALA LUMPUR – Budget 2026 is expected to signal a shift from last year’s record-breaking spending spree to a more measured and fiscally realistic approach, with an emphasis on targeted support and long-term sustainability rather than broad populist measures.
Speaking to Scoop, Universiti Teknologi Petronas adjunct lecturer and economist Samirul Ariff Othman said that three factors are shaping the government’s recalibration: the unprecedented scale of Budget 2025, the lingering burden of 1MDB debt, and the urgent need to reform Malaysia’s costly subsidy regime.
“Budget 2025 was Malaysia’s largest ever, rising to nearly RM421 billion after mid-year additions. Continuing at that scale without tax reform or stronger debt discipline would be unsustainable. So Budget 2026 is about careful calibration rather than outright expansion,” Samirul said.
He noted that about RM39.8 billion in 1MDB principal and interest payments still need to be serviced from public funds, a legacy liability that constrains fiscal space and limits new policy commitments without increased borrowing.
At the same time, soaring subsidy costs — projected to hit RM81 billion in 2025, mostly for fuel and energy — have forced a decisive shift towards more targeted support.
The nationwide rollout of the Budi95 fuel subsidy scheme in September marked a major structural change, capping the price of RON95 petrol at RM1.99 per litre for Malaysians through MyKad verification, while foreign vehicles and commercial fleets pay market prices.
“Subsidy rationalisation is now central to the government’s fiscal strategy. Targeted schemes like Budi95 show that Putrajaya is prepared to continue providing support, but only to those who truly qualify,” Samirul said.
Samirul stressed that Budget 2026 should be viewed as a strategic reset rather than a retreat.
“It reflects a maturing post-pandemic fiscal policy, the real cost of legacy debts like 1MDB, and a shift away from blanket generosity towards more precise and sustainable support for the rakyat,” he said.
This shift, he added, will also set the tone for the 13th Malaysia Plan (2026–2030), with the Madani economic framework evolving from reactive spending to structural reform — balancing fiscal constraints with cost-of-living relief through targeted interventions.
“The focus now must be on building a more resilient fiscal foundation. That means reducing dependence on subsidies, tackling legacy debts, and ensuring every ringgit spent delivers maximum impact.
“Only then can we guarantee sustained support for households without compromising national financial health,” he said.
Looking ahead, Samirul said Budget 2026 could serve as a litmus test for Malaysia’s long-term economic direction, signalling how the government intends to balance short-term relief with structural reforms to strengthen growth and rebuild fiscal buffers.
“The success of that balancing act will determine whether the country can navigate future economic headwinds while protecting ordinary Malaysians from rising living costs,” he added.
Prime Minister Datuk Seri Anwar Ibrahim, who also serves as finance minister, will table the 2026 budget in Parliament on Friday.
He has said the spending plan will align with the economic priorities of each state rather than being dictated solely by federal ministries. — October 7, 2025