Why is this topic relevant to me?
Every year, the national budget is filled with billions in large figures that give us headaches just looking at them. You might ask: What do these astronomical numbers have to do with me? Of course they do! How the government makes and spends money affects every aspect of our daily lives.
Today (9th October), Prime Minister and Finance Minister Anwar Ibrahim presented the Budget 2027 in the Dewan Rakyat. Besides major announcements and benefits, he also revealed a series of figures, such as: expenditure, revenue, fiscal deficit…
These numbers may seem complex and difficult to understand, but if we imagine the country as a household, while the budget as this household’s annual budget, it becomes easier to comprehend.
Suppose Ahmad is the head of household. To maintain household expenses whilst improving the family’s situation, he needs to create a budget to understand how much he expects to spend and earn.
Similarly, the government needs to formulate a budget every year, listing the following year’s expenditure and revenue to maintain the country’s daily operations whilst considering long-term development to ensure benefits for all citizens.
Next, let’s understand the 2027 budget figures together with charts and graphs.
Total Budget Expenditure: RM 459.8 Billion
Budget 2027 is worth RM459.8 billion, 40.6 billion more than 2026’s RM419.2 billion, equivalent to an increase of 12.5%.
The nation’s expenditure is mainly divided into:
Operating Expenditure: Expenses to maintain daily government operations, such as paying civil servants’ salaries and pensions, implementing subsidies and social assistance measures, and debt servicing, etc.
Development Expenditure: Expenses to promote national economic development, such as undertaking infrastructure projects, maintaining national security, building schools and hospitals, improving citizens’ health standards, and constructing affordable housing.
For Ahmad, operating expenditure is like maintaining the household’s daily operations, such as: paying utility bills, buying groceries and cooking, etc. As for development expenditure, it’s about improving quality of life, such as: renovating the house, purchasing new furniture and appliances, etc.
Civil Servants’ Salaries Account for One-Fourth of Expenditure
Next year, our country’s operating expenditure is expected to be RM 376.8 billion, accounting for 81.95% of total expenditure. Among this, civil servants’ salaries remain the largest category of operating expenditure.
As for development expenditure, it’s 83 billion ringgit, or 18.05% of total expenditure, 2 billion ringgit less than 2026 (81 billion ringgit).
How Much Do Government Ministries Spend?
Looking at Government ministries, the three ministries receiving the most allocations next year remain the Ministry of Education, Ministry of Finance, and Ministry of Health.
Expected Revenue of RM380.8 Billion
Just as Ahmad needs to work to earn money to support his family, the nation’s revenue mainly comes from three major sources:
Direct Taxes: Taxes levied directly on individuals’ or companies’ income and wealth, such as personal income tax and corporate tax.
Indirect Taxes: Taxes levied indirectly when purchasing or using goods and services, such as Sales and Service Tax (SST).
Non-Tax Revenue: Income obtained from services provided by the government, such as outpatient fees at government hospitals and clinics.
The government expects next year’s revenue to be 380.8 billion ringgit, an increase of 11% compared to 2026. Among this, tax revenue remains the main contributor, reaching 297.1 billion ringgit, accounting for 78% of total revenue.
29 Consecutive Years of Fiscal Deficit
When you read this far, you’ll discover a fact: the government’s expenditure exceeds its revenue.
You’re not mistaken, and this situation of “expenditure exceeding income” has continued from 1998 until now—in economics, this is called a fiscal deficit.
A fiscal deficit is a fiscal allocation situation where the government’s revenue cannot meet its fiscal expenditure needs during a financial year.
Simply put, it’s like every RM100 that Ahmad earns, he would spend RM120, while the shortfall needs to be borrowed or taken from savings.
Conversely, when revenue exceeds expenditure, the country experiences a fiscal surplus.
Why Can’t We Achieve a Balanced Budget?
Theoretically speaking, a balanced budget is the optimal fiscal situation, but in reality, countries need substantial amounts of money to solve many problems. For example, to stimulate economic development, they may lower tax rates or increase spending, resulting in expenditure exceeding income.
Forbes magazine points out that when a country experiences a high fiscal deficit, this leads to increased government borrowing, thereby raising interest rates, reducing private investment, and thus hindering economic growth.
Simply put, having a fiscal deficit means the government doesn’t have enough money and needs to borrow to develop the country.
Additionally, huge fiscal deficits also put pressure on the inflation rate, as excessive government spending may lead to increased money supply, which may in turn lead to rising prices.
Nevertheless, the government has implemented fiscal consolidation measures in recent years, and through efforts to “reduce spending”, our country’s fiscal deficit has begun to decrease.
This means the country owes less debt, doesn’t need to spend as much money on interest, and the money saved can be used to benefit all citizens.
This year’s fiscal deficit is expected to account for 3.6% of GDP ratio, whilst in 2027 it will further reduce to 3.3%.