By Samirul Ariff Othman

KUALA LUMPUR, Malaysia: Recent commentaries have accused the Madani administration of turning the national budget into a “lottery ticket,” citing record expenditure and rising debt.

This analysis sets the record straight. Malaysia’s Budget 2026 is neither reckless nor populist. It reflects a structural shift: replacing blanket subsidies with targeted protection, strengthening fiscal law, modernising taxation, and investing in high-value sectors.

Deficits are falling, governance rules are tightening, and growth remains steady. The charge of “fiscal freefall” confuses expansion with reform and nostalgia with discipline.

The so-called ‘explosion’ in spending

The claim that federal expenditure has “ballooned 52 per cent” since 2015 omits two fundamentals: scale and inflation.

Malaysia’s nominal GDP has almost doubled from RM 1.15 trillion (2015) to RM 2.2 trillion (2025). In the same decade, population and responsibilities expanded across health, digital, climate, and social infrastructure.

The budget-to-GDP ratio, however, is broadly unchanged at 19–21 per cent — the same range as under Najib.

The deficit is smaller: 3.8 per cent (2025) and projected 3.5 per cent (2026) versus 6 per cent in 2015.

Spending growth therefore reflects modernisation, not indulgence.

The main increases lie in education, healthcare, industrial upgrading, and climate resilience — investments that raise productivity, not political patronage.

Ending blanket subsidies, building targeted protection

Subsidy rationalisation has finally begun. Cheap fuel and electricity once subsidised the wealthiest 20 per cent the most.

The new BUDI 95 and SARA Untuk Semua schemes, linked to PADU, redirect benefits to households and gig workers genuinely in need.

This shift already saves RM 15.5 billion a year, channelled into food security, TVET, and digital infrastructure.

Fiscal prudence today is not about cutting everywhere; it is about cutting waste and protecting need.

Debt service: contained, not collapsing

Debt service costs at 15 per cent of revenue sound large, but they have been stable since 2019.

The rise in nominal value stems from pandemic borrowing, not new recklessness.

Malaysia’s Fiscal Responsibility Act (FRA) now binds the government to reduce debt below 60 per cent of GDP and the deficit below 3 per cent by 2028 — for the first time, a legal fiscal anchor exists.

By contrast, from 2009 to 2017 the deficit averaged 5.1 per cent and debt almost doubled with no statutory limits.

Budget 2026 is consolidation under law, not expansion by impulse.

New taxes, old myths

The Capital Gains Tax, Luxury Goods Tax, and e-Invoicing reforms do not “feed a bloated state.”

They modernise revenue collection in an economy where the tax-to-GDP ratio (11.8 per cent) is far below Thailand (16 per cent) or Vietnam (19 per cent).

Malaysia’s problem is not over-taxation; it is under-collection and leakages.

Closing loopholes and digitising compliance widen fairness and reduce corruption — that is prudence in practice.

Operating expenditure: legacy, not luxury

High operating costs reflect legacy obligations — civil-service wages and pensions frozen in older schemes.

Budget 2026 begins gradual pension reform: new entrants will shift to contribution-based plans.

Meanwhile, RM 64 billion for education and RM 42 billion for health are not extravagance.

Malaysia still spends less per capita on both than regional peers.

Pruning these sectors for cosmetic austerity would be fiscally foolish and socially reckless.

Growth vs redistribution — A false dichotomy

With 40 per cent of households below the Minimum Adequate Living Income, social spending is not populism; it is foundation.

The Madani agenda couples inclusion with productivity.

Industrial policy drives the high-tech frontier — via the New Industrial Master Plan 2030 (NIMP), National Semiconductor Strategy (NSS), and National Energy Transition Roadmap (NETR) — mobilising over RM 500 billion in public-private investment.

This is fiscal activism with economic purpose.

Real Discipline Lies in Governance

Since 2023, Malaysia has enacted more fiscal guardrails than any administration in recent memory:

• FRA for deficit ceilings;
• Government Procurement Act (upcoming) for transparency;
• PADU database for targeted aid;
• e-Invoicing and MyDigital ID for formalising the informal economy;
• A new Public Finance Committee to monitor fiscal performance.

This is not political theatre. It is system-building.

Conclusion: reform, not recklessness

Comparing 2015 and 2026 without context is comparing different economies.

Malaysia today is a mid-income industrialising nation, not an oil-dependent exporter under fiscal strain.

Budget 2026 is a fiscal reset — larger in numbers but tighter in rules.

It spends more on the right things, borrows within limits, and reforms the very machinery of public finance.

Malaysia is not spending like a gambler; it is investing like an adult — in education, technology, resilience, and trust.

As Deng Xiaoping observed, “It doesn’t matter whether the cat is black or white, as long as it catches mice.”

The Madani government is catching the right mice — corruption, inefficiency, and exclusion — even if the clean-up costs a little more today.

That is not a fiscal freefall. That is what responsible nation-building looks like.

*Samirul Ariff Othman is an economist, international relations analyst, adjunct lecturer at Universiti Teknologi PETRONAS (UTP), and a senior consultant with Global Asia Consulting.*