Rabat:The Ministry of Finance (MoF) of Malaysia has projected a reduction in the country's fiscal deficit to 3.3% of the gross domestic product (GDP) by 2027. This forecast aligns with the medium-term goals outlined in the Public Finance and Fiscal Responsibility Act 2023.
According to BERNAMA News Agency, the MoF emphasized that the consolidation process would be carefully adjusted to match prevailing economic conditions. The focus will be on sustainable revenue enhancements and efficient expenditure to ensure a stable financial framework.
The ministry noted that borrowing needs would be minimized, supporting a sustainable financial profile and aiding in the medium-term debt management strategy. Additionally, increased private sector involvement through public-private partnerships and co-investment will support public financing for infrastructure projects and investments with strong economic potential.
The Government-Linked Enterprises Activation and Reform Programme (GEAR-uP) will continue to drive investments in strategic sectors, aligning with Malaysia's national development goals.
Petroliam Nasional Bhd's dividend is expected to increase from RM20 billion to RM27 billion due to higher global crude oil prices, providing a fiscal buffer to address additional expenditure demands. Federal revenue is forecasted to rise by 6% to RM363.6 billion in 2026, surpassing initial estimates.
The fiscal deficit for 2026 has been revised from the original target of 3.5% to 3.6% of GDP, reflecting Malaysia's response to external challenges and improved revenue performance. The ongoing West Asia conflict and supply chain disruptions have exerted pressure on global trade, affecting living costs and fiscal resources.
In response, the government has implemented a coordinated strategy to ensure the supply of essential goods, manage cost pressures, and bolster economic resilience. Measures include targeted fuel subsidies and adjustments to fuel quotas to manage demand.
For 2026, over RM15 billion in financing support was allocated to micro, small, and medium enterprises (MSMEs). This included RM5 billion through Syarikat Jaminan Pembiayaan Perniagaan Bhd, another RM5 billion from the SME Stabilisation Relief Facility under Bank Negara Malaysia, and microfinancing from various agencies.
Expenditure reprioritization helped manage the fiscal impact of higher oil prices, leading to increased fuel subsidies of RM40 billion. Domestic energy stabilization allowed the BUDI95 monthly quota to return to 300 liters from September 2026. Additionally, electricity bill assistance was expanded, raising the exemption threshold to 800 kilowatt-hours per month until the end of 2026.
Despite the challenging global fiscal landscape, the government is committed to maintaining fiscal discipline and ensuring progress on the medium-term consolidation path. Borrowing needs will be managed prudently, supporting fiscal resilience and preserving policy space.
The policy direction will focus on productive investments to enhance long-term economic potential while addressing immediate public needs. The fiscal strategy will continue to support growth while upholding commitments to fiscal consolidation, with resources prioritized for programs yielding high economic and social returns.