Cautious vs bold: Experts compare the 2027 Budget with the Joint Budget

MALAYSIA, 11 OCTOBER 2026 —

Malaysia’s government has unveiled a RM459.8 billion budget for 2027 that prioritises targeted subsidies and phased fiscal consolidation, while an alternative “Bersama” budget presented by opposition coalition leader Rafizi Ramli on Oct. 7 bets on a sweeping goods and services tax and the removal of fuel subsidies to fix structural weaknesses in the economy.

Analysts contacted by Malaysiakini agree the Bersama shadow budget addresses structural gaps left untouched by the government’s plan, though they differ on whether the administration’s caution is warranted. The contrast frames a debate over the pace and depth of reform as Malaysia navigates a narrow fiscal path between near-term household relief and long-term revenue repair.

Associate Professor Ahmed Razman Abdul Latiff of Putra Business School said the government’s staged consolidation — delivered through targeted aid, tax relief and wage increases — offers households more certainty and protection in the short run. “However, he warned that an overly cautious approach could slow the reforms needed to boost national revenue and ease long-term fiscal pressure,” he said.

By contrast, the Bersama proposal calls for a 5% GST to replace the current Sales and Services Tax for a ten-year period, the abolition of RON95 fuel subsidies, and the replacement of the Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (Sara) cash transfers with a universal monthly package covering living costs, fuel, children and a social pension.

Savings from subsidy removal would finance the new transfers, which Bersama says would be administered under a single ministry to coordinate the 189 agencies currently operating in silos.

Ahmed Razman said the Bersama plan could correct structural flaws but cautioned that reintroducing GST and cutting subsidies risk raising the cost of living if sufficient safeguards for vulnerable groups are not in place.

The government’s budget allocates more than RM80 billion for subsidies, aid and incentives — up from RM49 billion in 2026 and the largest such envelope to date. In his parliamentary speech, Prime Minister Anwar Ibrahim said the fiscal deficit is expected to reach 3.6% of GDP this year, above the original 3.5% target, before narrowing to 3.3% in 2027 and 3% by 2028.

Federal debt is projected to fall to 63.7% of GDP next year, while revenue is forecast to rise to RM380.8 billion.

Bersama projects its package would lift revenue to RM392 billion in 2027, cut the deficit to 3% of GDP — equivalent to RM70.3 billion — and lower the debt ratio to 63.6%. The coalition forecasts a further decline to 1.8% by 2031 and targets Malaysia’s first federal budget surplus since 1997 by 2035.

Geoffrey Williams, founder and director of Williams Business Consultancy, voiced clearer support for the Bersama blueprint. He described it as “a completely new approach” because better fiscal management would free more funds to help citizens. Referring to the 2035 surplus target, Williams said the government appears content merely to keep debt and deficit within set ceilings. “That target can be achieved if the economy grows faster than debt.

In that situation, the debt ratio can fall even as total debt keeps rising,” he said.

Williams also noted Anwar did not mention GST in his speech, linking the omission to the prime minister’s longstanding opposition to the tax and earlier reports of possible SST adjustments. “Anwar raised certain thresholds and lowered some rates, but did not implement any ‘real reform’,” Williams said. “Anwar still relies on STR and Sara without undertaking real reform to help the middle-income group.

Bersama, by contrast, proposes child allowances, pensions and monthly cost-of-living aid for all, regardless of race or interest group, to raise people’s incomes.”

He added that the government budget still leans on the old method of keeping petrol and diesel prices low through intervention, whereas Bersama wants to end what it calls wasteful subsidies and replace them with targeted aid. “Bersama’s reform covers all segments and brings a new approach unlike anything we have seen before. Anwar’s budget focuses more on administrative matters and giving aid to specific groups.

It lacks a comprehensive vision or reform that covers all citizens. Its approach is almost the same as budgets of previous years,” Williams said.

In his speech, Anwar framed the budget as a test of public trust in the government’s ability to control power, enforce the law and manage public funds with integrity.

Tax experts struck a more supportive tone on the government’s restraint. Deloitte Malaysia Tax Leader Sim Kwang Gek said the decision to avoid new taxes is part of a targeted strategy. “The budget focuses on strengthening economic fundamentals and preparing Malaysia for future growth. The government did not introduce tax reforms or new taxes,” she said.

Deloitte Malaysia Global Employer Services Leader Ang Weina said the measures aim to bolster the financial position of middle-income households through tax reductions, additional reliefs and housing incentives. She highlighted support for the “sandwich generation” — those supporting children while caring for ageing parents — saying enhanced tax reliefs are expected to ease their burden.

Chartered Tax Institute of Malaysia President Alan Chung said tax savings for micro, small and medium enterprises would help businesses cope with inflation and rising energy costs driven by recent geopolitical tensions. Extended tax relief periods would reduce cash-flow pressure from capital investment and encourage domestic investment, he added.

Deloitte Malaysia Country Managing Partner Yee Wing Peng said the push to cut the deficit to 3.3% of GDP while continuing to invest in artificial intelligence, digitalisation, education, talent development and strategic infrastructure shows a commitment to balancing fiscal stability with economic growth.

Related: Parliament · Anwar Ibrahim · Malaysia