Budget 2026 Marks Turning Point In Malaysia’s Fiscal Narrative – Economist

By Naveen Prabu Kuppusamy

KUALA LUMPUR, Oct 13 (Bernama) -- Malaysia’s Budget 2026 represents a clear shift in the government’s fiscal strategy, prioritising efficiency and discipline over new taxes to create spending space, according to economist Geoffrey Williams.

He said the government has demonstrated that it can manage fiscal consolidation while maintaining allocations for key sectors, marking a departure from the long-held notion that increased spending must come from new or higher taxes.

“The general narrative that the government should tax more to spend more has been broken, as the government can create fiscal space by cracking down on wastage, leakages, and corruption rather than increasing taxes,” he said in an online interview on Bernama World with Melissa Ong during the programme called ‘Budget 2026: The cost and the cure’.

Williams described the budget as “a final phase in fiscal housekeeping”, reflecting tighter spending controls and improved governance.

He said that although the budget is officially valued at RM470 billion, a significant portion comes from government-linked investment companies (GLICs), government-linked companies (GLCs), and statutory bodies, making it effectively smaller than the 2025 budget. “This budget is smaller than what was planned for 2025, and that shows a real turning point in fiscal policy, as it means the government can do more with less by cutting wastage, leakages, and corruption,” he added.

The economist stated that, although no new broad-based taxes were introduced, revenue growth is expected from existing sources, supported by enhanced enforcement measures such as e-invoicing and the upcoming carbon tax. “Overall revenue is expected to be higher next year than this year, and the government doesn’t need to push for higher taxes as it is saving RM15.5 billion in subsidy rationalisation and has recovered another RM15.5 billion through anti-corruption efforts,” he noted.

Williams also downplayed inflationary risks from targeted subsidies, noting that the measures involve reallocations rather than additional spending. “The government’s inflation forecast for next year is that it won’t go above 2 per cent, which is probably about right, and I don’t see any particular inflationary consequences from these rationalisation changes,” he said.

-- BERNAMA