The BGA Malaysia team wrote an update to clients on Malaysia’s 2026 budget..

Context

  • Prime Minister and Finance Minister Anwar Ibrahim October 10 tabled Malaysia’s 2026 national budget. Themed “Belanjawan Rakyat” (“people’s budget”), the budget marks a pivotal moment for Malaysia’s fiscal reform trajectory as it enters the first year of the five-year 13th Malaysia Plan. It sets the tone for national rejuvenation through disciplined fiscal management, institutional strengthening and people-centric economic expansion.
  • In contrast to earlier stimulus-oriented budgets, the 2026 fiscal plan focuses on embedding reform outcomes and returning the gains of fiscal consolidation to citizens through targeted subsidies, improved governance and stronger institutional delivery. The budget also anchors Malaysia’s strategic position amid a complex global environment defined by tariff wars, climate stress and technological acceleration.

Significance

  • Anwar’s 2026 budget stands as the largest fiscal plan in Malaysia’s history at MYR 470 billion ($100.5 billion). This is an increase of 4 percent from the MYR 452 billion ($97 billion) allocated in last year’s budget. The allocation comprises MYR 338.2 billion ($72.4 billion) in operating expenses and MYR 81 billion ($17.4 billion) in development spending.
  • The 2026 budget emphasizes people-centric redistribution and social upliftment. The recent rationalization of blanket subsidies for RON95 fuel and diesel, as well as the restructuring of electricity tariffs, is estimated to save the country MYR 15.5 billion ($3.7 billion) annually. These savings will be channeled back to the people through a mix of targeted and broad-based cash transfers to address cost-of-living concerns.

Implications

  • BGA views the presented budget as politically safe. Risky announcements such as the rationalization of blanket subsidies were made weeks ahead of the budget presentation. In addition, a more accommodative allocation to grassroots initiatives is observed throughout the budget. The budget speech also highlighted the government’s existing and planned initiatives to develop the eastern states of Sabah and Sarawak. This is no coincidence given that the state election in Sabah will be held within the next few weeks.
  • The government continues to advance its industrial and digital transformation agenda under the New Industrial Master Plan (NIMP) and National Semiconductor Strategy. A total of MYR 1.4 billion ($330 million) in funding is allocated to strengthening the semiconductor ecosystem, promote artificial intelligence (AI) integration and upgrade manufacturing capabilities.
  • The budget strengthens Malaysia’s aspirations to become an AI nation by 2030. The National AI Office will receive MYR 20 million ($4.3 million) to build national AI capabilities, while the Malaysia Communications and Multimedia Commission was allocated MYR 2 billion ($426 million) to spearhead the development of a Sovereign AI Cloud.

We will continue to keep clients updated as the budget is debated. Comments and questions can be directed to BGA Malaysia Senior Director Sadiq Nor Azlan at msadiq@bowergroupasia.com.

Best regards,

BGA Malaysia Team

A small ginko leaf

Senior Director

Sadiq brings his deep understanding of political dynamics and ability to recognize key government stakeholders to his role as director for BGA Malaysia. Sadiq joined BGA in mid-2019, after serving as special officer to the minister of finance under two different administrations. In addition to advising on topics ranging from the country’s annual budget, legislative procedures, subsidy rationalization and election campaigns, he managed engagement with other ministries, private and public agencies, government-linked companies and multinational corporations, foreign leaders, business chambers, media personnel and politicians. Sadiq obtained his bachelor’s degree in economics from the University of Massachusetts Amherst. He spent over ... Read More