The federal government has unveiled a RM419.2 billion budget for 2026, marking a slight reduction of RM2 billion from the 2025 allocation of RM421 billion. This is only the second time Malaysia’s budget has surpassed the RM400 billion mark, reflecting a careful balance between fiscal discipline and strategic investments to drive national development.
Operational Expenditure: Supporting Civil Servants and Social Aid
Operational expenditure dominates the 2026 budget, accounting for RM338.2 billion or 80.7% of the total allocation. This represents a 1.8% increase from the revised 2025 budget, driven largely by emoluments, which constitute the largest share at RM109.4 billion. The increase is primarily due to the second phase of the public service remuneration system, set to take effect in January, which will grant a 7% basic salary hike for civil servants in Grade 15 and below.
Subsidies and social assistance see a notable 14.1% reduction to RM49 billion, attributed to lower global commodity prices and the government’s shift towards targeted subsidy measures, such as the BUDI95 programme. Approximately 56% of this amount will support vulnerable groups through initiatives like Sumbangan Asas Rahmah and Sumbangan Tunai Rahmah.
Retirement and debt service charges also rise, with RM42.8 billion allocated for pensions, gratuities, and leave awards, marking a 6.8% increase. Debt servicing is budgeted at RM58.3 billion, with 98.8% directed towards domestic loans. The Treasury highlighted that prudent debt management and active investor engagement have optimized borrowing costs.
Development Expenditure: Driving Economic and Social Progress
The remaining RM81 billion is earmarked for development expenditure, funding 2,300 programmes and projects under the 13th Malaysia Plan. The economic sector claims the largest portion at RM36.8 billion (45.4%), with RM17.5 billion allocated to the transport subsector. Key projects include Malaysia-Indonesia border connections, an air traffic control centre in Kota Kinabalu, and new interchanges on the North-South Expressway in Negeri Sembilan and Perak.
Environmental initiatives receive RM3.8 billion, focusing on nature preservation, climate change, and flood mitigation projects in Kedah, Terengganu, Johor, and Negeri Sembilan. A nationwide river conservation project and a national flood forecast and warning centre in Kuala Lumpur are also planned to reduce flood risks.
In the social sector, RM14.5 billion will enhance education facilities and ICT infrastructure to bridge the rural-urban divide and modernize learning. The health sector is allocated RM7 billion for projects such as a northern region cancer centre in Kedah and new government clinics in Sabah, Sarawak, and Penang.
Strengthening Security
The security sector receives RM11.7 billion, with RM8 billion dedicated to defence and the remainder to internal security. A significant portion will support the acquisition of defence and security assets, ensuring Malaysia’s safety and stability.
About The Author
