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THE government’s move to instruct ministries to review operating expenditure in response to the West Asia conflict has been described as timely and necessary, as global economic uncertainty intensifies and energy markets remain volatile.
UniKL Business School Associate Professor Aimi Zulhazmi Abdul Rashid said that the ongoing crisis in the Middle East is creating what he termed a “double shock” to the global economy, driven by rising oil prices and heightened risks of supply chain disruption.
“No one can predict when this conflict will end. Therefore, the government needs to take precautionary steps, including reviewing operating expenditure to ensure the country’s fiscal position remains stable,” he said in comments to Berita Harian.
He added that instability in global energy markets has been exacerbated by developments among oil-producing nations, including shifts within alliances such as OPEC, which could further affect global price stability.
According to him, existing budget assumptions are becoming less reliable for 2026, requiring a recalibration of government spending strategies to reflect changing global conditions.
He also warned that Malaysia’s fiscal space is narrowing, with national debt approaching 65 per cent of gross domestic product and rising interest payment obligations placing additional strain on public finances.
In response, he recommended a more structured and targeted fiscal rationalisation exercise, clearly distinguishing between operational and development expenditure.
“Non-critical spending such as official ceremonies, gifts and office renovations can be reduced,” he said.
“However, key projects such as water treatment plant upgrades, hospitals and cyber security should not be cut as they have a direct impact on public welfare and national security.”
He further stressed that allocations for three core sectors—healthcare, defence, and food and energy security—should be protected due to their strategic importance amid global uncertainty.
Savings generated from expenditure rationalisation, he suggested, could be redirected towards targeted subsidies and the establishment of a contingency fund to prepare for prolonged crises.
On governance, he proposed that any adjustments to expenditure be tabled in Parliament to ensure transparency and to avoid negative perceptions regarding austerity measures.
“The government must be clear on where savings are made and where the funds are channelled, to avoid the perception that cost-cutting is not accompanied by reduced leakages,” he said.
He also cautioned against indiscriminate spending cuts, warning that poorly planned reductions could create sudden shocks to the domestic economy.
If not carefully managed, he said, such measures could negatively affect small and medium enterprise vendors as well as contract workers dependent on government-linked expenditure.
He concluded that the government’s primary focus should be on controlling non-essential spending without undermining economic growth or public welfare. - April 30, 2026
