Kuala Lumpur: Prime Minister Datuk Seri Anwar Ibrahim today announced a RM470 billion federal budget for 2026, a smaller spending plan compared to last year, as revenue growth is projected to slow.
According to the government's Fiscal Outlook and Federal Government Revenue Estimates report, total revenue for 2026 is forecast to grow by 2.7 per cent to RM343.1 billion, a slight moderation from the 2.9 per cent growth seen in 2025.
Where the money is going
The budget allocates RM338.2 billion for operating expenditure, a 1.8 per cent increase from 2025.
A significant portion of this is locked into three main mandatory expenses: public service salaries (emoluments), which account for over a quarter of the total; debt servicing, which will take up nearly 14 per cent; and pension payouts at 10.2 per cent.
For development expenditure, the government has reversed two consecutive years of cutbacks, raising the allocation by 1.8 per cent to RM81 billion.
This funding is earmarked for economic projects (8.8 per cent), social development (6.8 per cent), and security (2.8 per cent).
Fiscal prudence and subsidy savings
The allocation for subsidies in 2026 is slightly lower, reflecting savings from the newly implemented targeted petrol subsidy scheme.
Putrajaya had previously estimated it would save between RM3 billion and RM4 billion annually from this subsidy rationalisation.
These measures support the government's commitment to fiscal discipline. Anwar has repeatedly stated his aim to reduce the fiscal deficit, targeting 3.4 per cent of Gross Domestic Product (GDP) for 2026.
Income tax remains the single largest contributor to government revenue, accounting for 41.5 per cent of the total projected income.
