KUALA LUMPUR — The Federal Government has estimated its Budget 2027 allocation at RM459.8 billion, a 3.6% increase from the revised 2026 budget, equivalent to 19.8% of gross domestic product (GDP).
The Finance Ministry (MoF) said Budget 2026 had been revised upwards to RM441.1 billion from its original allocation of RM419.2 billion to reflect changes in spending priorities and fiscal requirements during the year, Bernama reported.
In its Fiscal Outlook and Federal Government Revenue Estimates 2027 report released today, the ministry said RM376.8 billion, or 81.9% of the proposed 2027 budget, would go towards operating expenditure (OE), while RM83 billion was earmarked for development expenditure (DE).
The government will continue to prioritise people-centric programmes and projects, with 30.2% of the total allocation directed to the Education, Health and Defence ministries.
Operating expenditure
The social sector will receive the largest share of total expenditure, at RM161.6 billion or 35.1%, reflecting the government’s focus on human capital development and public welfare.
“The social sector will receive the largest share at RM161.6 billion (35.1 per cent) of total expenditure, reflecting the government’s continued emphasis on human capital development and public welfare.
“This is followed by the economic (RM59.4 billion; 12.9 per cent), security (RM46 billion; 10 per cent) and general administration (RM23.4 billion; 5.1 per cent) sectors,” MoF said, adding that the remaining RM169.4 billion comprised charged expenditure and transfer payments.
Operating expenditure is projected to account for 16.2% of GDP, representing a 3.8% increase from the revised 2026 budget. The rise is attributed to higher allocations for emoluments, retirement charges, debt servicing, supplies and services.
Emoluments remain the largest component of OE at RM111.6 billion, or 29.6%, with spending expected to grow by 2.9% in line with annual salary increments.
Meanwhile, allocations for subsidies and social assistance are projected to fall by 2.3% to RM72.7 billion, representing 19.3% of OE.
Debt service charges (DSC) are expected to rise by 6.5% to RM61 billion, accounting for 16.2% of operating expenditure. Domestic debt servicing will make up 98.4% of the total.
Development expenditure
The ministry said RM83 billion had been set aside for development expenditure in 2027, covering allocations for about 1,500 newly approved programmes and projects.
“The economic sector continues to receive the largest share at 45.4 per cent, followed by social (33.7 per cent), security (14.7 per cent) and general administration (6.2 per cent) sectors,” it said.
The government also remains committed to allocating at least 3% of GDP to development expenditure, in line with the Public Finance and Fiscal Responsibility Act 2023 (Act 850).
The economic sector will receive RM37.7 billion to enhance national competitiveness through strategic infrastructure expansion and investment promotion.
The transport subsector accounts for the largest portion of this allocation, receiving RM17.6 billion, or 46.6%, to improve connectivity nationwide and ease traffic congestion.
Another RM3.6 billion will go to the environment subsector to strengthen environmental resilience and advance climate change mitigation and nature conservation efforts.
The trade and industry subsector will receive RM3.5 billion to support industrial development, entrepreneurship and investment-related activities.
The remaining development funds will be channelled to the social, health, housing, security and general administration sectors, MoF said.
The government will also extend RM1 billion in loans under development expenditure to support infrastructure projects and improve the people’s quality of life.
State governments will receive the largest share of these loans at RM503 million, followed by companies at RM463 million, federal statutory bodies at RM58 million, and other organisations and cooperatives at RM2 million.
Loan repayments are projected to total RM1.5 billion, with companies expected to account for the largest amount at RM955 million.
State governments are projected to repay RM419 million, followed by federal statutory bodies at RM120 million and other organisations and cooperatives at RM6 million. — October 9, 2026