KUALA LUMPUR: The government expects the country's fiscal deficit to continue to shrink to 3.5 per cent in 2026, close to achieving the medium-term target of 3.0 per cent under the Public Finance and Fiscal Responsibility Act (FRA) 2023, reflecting increasingly strong fiscal discipline.
Finance Minister II Datuk Seri Amir Hamzah Azizan said fiscal discipline was implemented in stages to ensure a balance between deficit reduction and expansionary fiscal policy to support economic growth and national development.
"We have successfully reduced the country's fiscal deficit from 6.4 per cent in 2021 to 4.1 per cent in 2024, with a target of 3.8 per cent in 2025, before it is expected to decrease further to 3.5 per cent in 2026 as outlined in Budget 2026.
"This reduction was achieved, among other things, through the broadening of the tax base including improvements to the Sales and Services Tax and the targeting of subsidies, especially electricity, diesel and RON95," he said when winding up the debate on the Motion of thanks for the Royal Address for the Ministry of Finance in the Dewan Rakyat today.
Amir Hamzah said the country's fiscal reforms were also recognised by international bodies such as the International Monetary Fund (IMF) in its report in December 2025.
Along with the fiscal consolidation, he said economic growth exceeded expectations despite facing global economic uncertainties, with Gross Domestic Product growth in 2025 estimated to reach 4.9 per cent, taking into account the initial estimate of growth in the fourth quarter of 2025 which reached 5.7 per cent.
Meanwhile, trade also grew strongly by more than six per cent and reached a historical high of RM3 trillion, he said.
Amir Hamzah said all the economic achievements achieved were the result of the MADANI Government's comprehensive approach, including responsible and prudent economic management and efforts to facilitate business to boost growth, investment and trade.
He said the world recognised the country's rise and determination to bring about change as investor confidence and the country's competitiveness continued to be strengthened.
"The performance of the ringgit continues to be strong and reached its best level in almost eight years, at RM3.92 against the US dollar as of Jan 28, 2026, thus maintaining its position as one of the best performing currencies in Asia, reflecting the market's confidence in the management of the economy and the direction of government policy.
"Meanwhile, in the equity market, the FBM KLCI reached 1,771 points on Jan 27, 2026, the highest level in more than seven years,” he added.
Elaborating further, he said although the equity market recorded an outflow of foreign funds of around US$5.2 billion in 2025, the inflow of foreign funds into the country's bond market was much larger, reaching US$6 billion.
"The overall trend shows that Malaysia remains a stable investment destination. This can be seen through the continuous inflow of foreign funds into the country's bond market, reflecting investors' confidence in the stability of the Malaysian economy.
"January 2026 shows that investor sentiment is positive with both the equity market and the bond market each recording an inflow of foreign funds exceeding RM1 billion,” he said. - Bernama
