KUALA LUMPUR: The government’s revenue collection is estimated at RM343.1 billion, driven by an improvement in both direct and indirect tax collection.
According to the Ministry of Finance (MoF), the projection is supported by the full-year implementation of expanded sales tax and higher service tax, as well as ongoing digitalisation initiatives within the relevant tax collection agencies.
In its Fiscal Outlook and Federal Government Revenue Estimates 2026 released today, the MOF said non-tax revenue is projected to decline to RM72.7 billion, primarily due to the anticipation of lower investment income.
On expenditures, it said the government will continue to improve efficiency in public spending through reprioritisation and targeted distribution of fiscal resources, with total expenditure budgeted at RM419.2 billion or 19.7% of gross domestic product (GDP).
“Operation expenditure (OE) is projected to rise moderately to RM338.2 billion or 15.9% of the GDP, owing to lower subsidy allocation despite an increase in other OE components.
“Meanwhile, development expenditure (DE) allocation is increased to RM81 billion or 3.8% of GDP, to fund new programmes and projects under the 13th Malaysia Plan (13MP),” it said.
In addition, the co-investment of resources through government-linked entities and projects under the Public-Private Partnership (PPP) Master Plan 2030 will complement the nation-building agenda.
Overall, the fiscal deficit is projected to narrow to 3.5% of GDP in 2026, in line with the medium-term trajectory, guided by fiscal objectives governed under Act 850, according to the MoF.
“This gradual consolidation path demonstrates the government’s steadfastness in balancing support for growth and maintaining fiscal discipline.
“Meanwhile, the primary deficit is expected to decline to 0.8% of the GDP, reflecting the ongoing fiscal consolidation commitment,” it said.
For 2025, the government targeted a lower fiscal deficit of 3.8% of the GDP as tabled during Budget 2025, down from 4.1% in 2024, while total revenue is estimated at RM334.1 billion, an increase of 2.9% compared to RM324.6 billion registered in 2024.
Meanwhile, petroleum-related revenue is expected to be at RM56.6 billion or about 17% of total revenue, due to the lower-than-expected commodity prices.
The MOF said the primary balance, after excluding debt service charges, is anticipated to register a lower deficit of 1.1% of the GDP.
“With the deficit target on course, the government’s gross borrowing requirements are anticipated to ease, thus supporting a more sustainable debt trajectory in the medium term,” it said.
In the meantime, the Medium-Term Fiscal Framework (MTFF) 2026 – 2028, which is anchored by the fiscal sustainability targets in line with the MADANI Economy framework, will support the implementation of the 13MP, while maintaining the fiscal consolidation trajectory.
“The guiding assumptions of the MTFF include an average real GDP growth of 4.9%, with crude oil prices projected to average at US$70 per barrel and crude oil production between 450,000 and 500,000 barrels per day.
“Total revenue is projected at RM1.07 trillion or 15.7% of the GDP for the 2026 – 2028 period, contributed by non-petroleum revenue of RM943.1 billion or 13.8% of the GDP, which accounts for 88% of the total revenue,” it said.
The MOF said this is expected to be supported by improved Sales and Service Tax collection, digital-driven compliance, as well as the Global Minimum Tax.
Meanwhile, petroleum-related revenue is estimated to moderate to RM129.1 billion or 1.9% of GDP, in line with revenue diversification efforts.
“The indicative ceiling for OE is estimated at RM1.04 trillion or 15.4% of the GDP, while DE is projected at RM247 billion or 3.6% of the GDP.
“The average fiscal deficit is expected at 3.2% of the GDP over the medium term, reaffirming the fiscal trajectory towards achieving the deficit target of three per cent in 2028,” it said.
Looking ahead, the government will continue to align fiscal strategies with medium-term development priorities under the 13MP, while maintaining flexibility to respond to evolving challenges, said the MOF. – Bernama
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