GOING beyond handouts, Budget 2026 is intended to stimulate economic activity, especially in domestic sectors.
Circulating cash in the economy, the RM500 and RM250 aids to public servants and retirees, respectively, are direct injections of purchasing power.
This is especially potent in local economies. Money flows quickly into small businesses, who in turn pay wages, source materials and purchase inventory.
Since B40 households are more likely to spend additional cash, these transfers help shore up demand at the “bottom” of the income pyramid — a key buffer when external demand or exports soften.
Critics say the Budget does not reveal much in revenue generation.
The RM81 billion development budget - albeit RM5 billion less from 2015 - helps maintain continuity in public works, particularly in rural roads, sanitation, water supply, and utility upgrades — all sectors with strong local job linkages.
By keeping development projects alive, the budget helps sustain construction-related employment, purchases of materials, logistics, and local supplier chains.
The announcement of Kota Madani, schools, new hospitals, highways and progress reports on ECRL and LRT in Budget 2026, is an assurance that while not a fan of mega projects, the Madani Government will relent with adjustments if the benefits to the public outweigh the political and even corrupt motivations of past administrations.
One of the structural levers in Budget 2026 is reducing blanket subsidies and moving to targeted subsidy programmes.
The rationale has been oft repeated, but here they are anyway:
Savings from rationalisation free up funds for more efficient, direct transfers;
- It helps reduce distortions (e.g. over-consumption or leakages to higher-income groups); and
- It nudges more efficient usage and pricing in sectors such as fuel, utilities, or energy, improving private sector signals.
In essence, the budget tries to balance pro‑people initiatives with fiscal discipline. This enhances investor confidence and allows future flexibility.
Meanwhile, in restructuring the public service pay system, expanding performance incentives, and adjusting pay scales, the government is signalling a shift towards merit and a results-based reward system.
Hopefully, these structural reforms will help reduce inefficiencies, leakages, and bureaucracy.
Budget 2026 is carefully calibrated to deliver visible benefits to civil servants, retirees, and lower-income households.
The aim is clear: to create short-to-medium-term electoral goodwill while maintaining levers for economic management.
As we have seen in the three years of Datuk Seri Anwar Ibrahim’s administration, he takes the scenic route.
For instance, his promise of lower fuel took longer than expected — two years instead of two days.
The pace is slower as the obstacle course is more challenging, what with the likes of over RM50 billion in 1MDB dragging us down.
Debt under Budget 2026 remains high at 64%.
Anwar is also trimming the annual expenditure. This year, it is RM9 billion less. These are part of the reforms for an efficient government.
While it has many features of an “election budget,” if well-implemented, it could also act as a growth lubricant: keeping consumer demand afloat, helping local businesses, and maintaining political stability, all while attempting to avoid a fiscal drift that would undermine future budgets.
The RM700 million to agencies like the Malaysian Anti-Corruption Commission (MACC) and the Inland Revenue Board (LHDN) to amp up collection will see taxpayers — essentially the “Mahakaya” or Super Rich being called upon to pay their dues.
This includes efforts to bring back billions stashed abroad. Anwar’s rationale is that if, with the current resources, they were still able to retrieve RM15.5 billion, imagine the amount of money that could be recovered if these institutions had more resources.
But sluggish foreign direct investments is a valid concern. What more with FDI plunging to RM1.61 billion in Q2 from a whopping RM15.57 billion.
Time will tell in the short term if these plans will bear fruit. But at the moment, the rakyat Marhain are happy, and this should be enough for Anwar to gather the support and buy the time needed for further reforms. — October 12, 2025
Terence Fernandez is Editor in Chief of Big Boom Media, which publishes Scoop.
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