The federal government’s fiscal stance will remain supportive of growth while maintaining the government’s commitment to fiscal consolidation amid a challenging global environment and elevated crude oil prices.
Revenue is estimated to grow by 4.7% to RM380.8bil, with both direct tax and indirect tax collections expected to benefit from sustained economic activity and stronger compliance.
Revenue collection will continue to be supported by the progressive implementation of e-Invoice, which has encouraged taxpayer registration while strengthening tax compliance and enforcement.
This will be complemented by the transition towards the Stamp Duty Self-Assessment System beginning Jan 1, 2027.
Petroleum-related revenue, including dividends, will continue to remain sizeable. The focus will, therefore, remain on maximising the effectiveness of existing revenue measures and fine-tuning the implementation, thereby providing a more predictable taxation ecosystem, promoting a conducive business environment and enhancing the nation’s competitiveness.
On the expenditure side, fiscal resources will continue to be allocated prudently and prioritised towards programmes with high economic and social returns.
Operating expenditure is budgeted at RM376.8bil in 2027, an increase of 3.8% from the revised 2026 estimate, with spending focused on essential public services as well as targeted support for the rakyat, including social assistance and subsidies.
Meanwhile, allocation for development expenditure is higher at RM83bil, with resources directed towards programmes and projects under the 13th Malaysia Plan, 2026 to 2030, particularly in infrastructure, human capital development and climate-resilient projects with high-multiplier impact.
In line with the medium-term consolidation under Act 850, the fiscal deficit is projected to narrow further to 3.3% of gross domestic product in 2027.
The pace and quality of consolidation will remain calibrated to prevailing economic conditions, with fiscal adjustment anchored by sustainable revenue improvements and expenditure efficiency.
Consequently, borrowing requirements will be contained, thereby supporting a more sustainable financing profile, reinforcing the medium-term debt trajectory.
Greater private sector participation through PPP and co-investment arrangements will complement public financing for infrastructure and facilitate investment in areas with strong economic spillovers and long-term growth potential.
Budget 2027 will further advance the reform and development agenda, while maintaining an orderly fiscal consolidation path. The Medium-Term Fiscal Framework for 2027 to 2029 sets the basis for allocating public resources while maintaining prudent expenditure and strengthening capacity to manage emerging fiscal risks.
