KUCHING: Malaysia’s move to cut its fiscal deficit from 5.5 per cent in 2022 to 3.5 per cent by 2026 shows that the government can consolidate its finances without slowing growth, said Dzul Hadzwan Husaini.
The Universiti Malaysia Sarawak (UNIMAS) senior lecturer said the government had managed to realign its spending priorities while maintaining a comprehensive and forward-looking budget framework, even as total expenditure rises to RM470 billion.
“Approximately 72 per cent of the allocation is dedicated to operating expenditure, 17 per cent to development expenditure, and 11 per cent to investments.
“This balanced composition supports Malaysia’s economic structural transformation, particularly in energy transition, digital infrastructure, and industrial development,” he told Sarawak Tribune.
He said the subsidy rationalisation initiative, which is expected to generate savings of about RM15 billion, would allow the government to redirect funds towards targeted assistance and development programmes without undermining public welfare.
He added that the budget also highlights efforts to strengthen the Islamic economy, including expanding the role of sukuk in financing green and sustainable projects and enhancing the halal industry ecosystem.
“At the same time, initiatives in social protection, labour upskilling and entrepreneurship aim to build a more inclusive and resilient economy,” he said.
He described Malaysia’s fiscal consolidation as reform-driven rather than restrictive.
“It is about reforming and reprioritising to ensure that every ringgit spent contributes to long-term efficiency, competitiveness, and shared prosperity,” he said.
On the government’s plan to raise RM343.1 billion in revenue next year without introducing new taxes, Dzul said it was a realistic short-term move to maintain fiscal stability.
“In the short term, this is the most practical approach to maximise revenue while steadily improving the fiscal deficit.
“Introducing new taxes too quickly could risk dampening market sentiment and creating unnecessary economic distortions,” he said.
He added that governance reforms, anti-leakage measures, and subsidy rationalisation, which are expected to save RM15.5 billion annually, are sensible ways to strengthen fiscal stability.
He also welcomed the government’s plan to introduce a carbon tax, calling it a progressive step towards sustainable financing and green investment.
However, he said Malaysia must eventually broaden its revenue base through a more efficient and diversified tax system.
“Much of our revenue still relies on dividends and royalties from the oil and gas sector, as well as taxes closely linked to its value-added activities. This creates structural vulnerability,” he said.
“Introducing or revisiting a value-added tax or GST could strengthen the fiscal foundation, but it must be accompanied by clear communication and engagement with stakeholders to ensure public understanding, transparency and trust,” he added.
Turning to Budget 2026, Dzul described it as a reform-focused plan that combines fiscal restraint with strategic public and GLIC investments in semiconductors, renewable energy, and artificial intelligence.
“We need a consistent series of annual budgets like this to build momentum in repositioning both our fiscal and monetary foundations,” he said.
He said this mix of fiscal prudence and targeted investment could strengthen productivity, investor confidence, and the ringgit over the next five years.
“I believe this strategy will yield sustained economic prosperity and help strengthen the ringgit over the next five years.
“As the currency stabilises and gains strength, we will gradually reach the end game in easing cost-of-living pressures,” he said.
“In short, this is not just an expansionary budget. It is a transformative one designed to balance immediate welfare support with long-term structural resilience and investor confidence,” he added.
