KUALA LUMPUR — Budget 2026 reflects “better spending” by Putrajaya with its focus on the people, enforcement and reforms, while keeping debt under control, economist Samirul Ariff Othman said.
The federal government’s RM470 billion budget reflects a “measured and reformist approach” that balances fiscal consolidation with social compassion, said Samirul who is also a Universiti Teknologi Petronas adjunct lecturer.
He described Budget 2026 as the government’s “most disciplined and reform-focused to date” while fostering social inclusion through targeted measures such as direct cash transfers, technical and vocational education training (TVET) expansion, fuel subsidy rationalisation and gig worker protection.
“The Ikhtiar MADANI Untuk Rakyat and SARA Untuk Semua schemes extend the reform dividends back to ordinary citizens without compromising fiscal discipline,” he told Scoop.
“If the 2023–2024 budgets were about restoring stability and the 2025 budget about rebuilding confidence, then Budget 2026 is about institutionalising reform. It reads like a government preparing not for an election, but for long-term stewardship of the economy.”
The government intends to reduce the fiscal deficit for 2026 to 3.5% of gross domestic product (GDP), from this year’s 3.8%, keeping debt issuance under control, and rely on savings from subsidy rationalisation rather than new taxation.
“This tone makes clear that Malaysia has moved beyond survival budgets. This is not a populist exercise; it is a continuity budget with structural intent, Samirul added.
The economist also hailed Budget 2026’s emphasis on improving enforcement against corruption and leakages through stronger allocations for Malaysian law enforcement agencies, as well as governance measures under the Fiscal Responsibility Act and laws on government procurement.
“Budget 2026 is not about more spending, but better spending. Total outlays rise only modestly, yet there is a sharp increase in allocations that improve governance quality — digitalisation, enforcement, and institutional reform.”
Samirul also said Budget 2026 marked a continued pivot towards industrial transformation, particularly through the New Industrial Master Plan (NIMP) and the National Semiconductor Strategy (NSS), aimed at moving Malaysia up the global value chain.
“Malaysia is positioning itself for value-chain upgrading — in semiconductors, green technology, digital finance, and renewable energy,” he said.
Anwar announced Budget 2026 as RM470 billion, which includes about RM50 billion from investments by government-linked investment companies (GLICs), public private partnerships, federal statutory bodies and companies under Ministry of Finance Inc.
Samirul welcomed Putrajaya’s “redeployment” of GLICs like Khazanah and the Retirement Fund Inc (KWAP) as “catalytic investors” as they had committed RM30 billion in domestic co-investments.
Meanwhile, Centre for Market Education (CME) chief executive officer Carmelo Ferlito said although Budget 2026 reflected commendable progress in fiscal discipline, it still constrained “genuine market-led growth”.
“Budget 2026 still shows (the government’s) interventionist mindset.
“With RM470 billion in total spending, the state continues to expand its reach into the economy, limiting spontaneous coordination and market efficiency,” Ferlito told Scoop.
“True fiscal discipline also requires not just smaller deficits but sound, savings-based financing.”
Nevertheless, he said aiming to reduce the fiscal deficit to 3.5% of GDP is a responsible move “compared to the deficit expansionism of previous years”.
He also commended moves towards targeted subsidies such as BUDI95 and diesel subsidy rationalisation.
“Targeted schemes are less distortionary than universal subsidies, which fuel overconsumption and rent-seeking.”
He welcomed institutional reforms such as the strengthening of the Fiscal Responsibility Act and the introduction of more public-private partnerships, but warned that large-scale public spending still risked crowding out private enterprise.
Budget 2026 deserved credit for its progress towards discipline and transparency, Ferlito said, but noted the state still acted as “planner, investor, and allocator — roles incompatible with the spontaneous order that underpins prosperity.”
“It is a transitional budget — less populist than before, but still halfway between reformist rhetoric and genuine liberalisation,” Ferlito said. - October 11, 2025
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