PUTRAJAYA: The National Finance Council (NFC) has agreed to increase the grants provided by the Federal Government to state governments, with the total amount expected to reach RM10.5bil this year, said Prime Minister Datuk Seri Anwar Ibrahim.
Previously, federal government grants increased to RM10.3bil last year from RM8.1bil in 2022.
Anwar, who is also the Finance Minister, said the increase reflects the Madani Government’s commitment to strengthening the financial position of state governments to support socio-economic development and infrastructure across the country.
He said the increase involves, among others, the Shared List grants, state road maintenance grants, and the distribution of tourism tax revenue.
"This increase follows the rise in the capitation grant rate (known by its Malay acronym PMBO) starting in 2026, as outlined by the Madani Government,” he said in a statement after chairing the 2026 National Finance Council meeting here on Thursday (March 5).
Capitation grants are federal funds provided to states based on population size.
Meanwhile, the Finance Ministry (MOF) said that to improve the sustainability of state governments’ cash flow, the NFC also agreed to enhance the disbursement mechanism under the Shared List to ensure national revenue is distributed more fairly and based on the principles of good governance.
"The Madani Government is committed to improving federal government grants to all state governments every year for the benefit of all citizens, regardless of state or region,” Anwar said.
The MOF said the council also agreed that all grants under the Shared List would be disbursed earlier in conjunction with the Visit Malaysia Year 2026 campaign, in addition to fully allocating tourism tax collections to the respective states. The federal government will channel 100 per cent of tourism tax collections to the respective states, compared with the current practice, which allocates only 50 per cent.
The NFC also agreed to improve the state road maintenance grant by expanding its scope to include the procurement of modular steel panel bridges (Bailey bridges) as well as repair works and the widening of drains and ditches along state roads.
"The Madani Government is always open to working closely with all state governments, regardless of political stance. Improvements to these grants are important to accelerate socio-economic development and critical infrastructure so that we can stand as equals as one nation,” the Prime Minister said.
The MOF said the measures agreed upon by the NFC this year also reflected the government’s focus on enhancing economic sustainability and the well-being of the people nationwide. The effort is in line with the aspirations of the Madani Economy framework, which aims to raise the country’s potential growth ceiling and improve the standard of living of the people.
Earlier, Anwar chaired the 2026 National Finance Council Meeting held at the MOF here.
The meeting, which began at 3pm at the Treasury building, was also attended by both Deputy Prime Ministers - Datuk Seri Dr Ahmad Zahid Hamidi and Datuk Seri Fadillah Yusof; Finance Minister II Datuk Seri Amir Hamzah Azizan; Minister in the Prime Minister’s Department (Federal Territories) Hannah Yeoh; and Deputy Finance Minister Liew Chin Tong.
The annual meeting serves as a platform for the federal government and state governments to negotiate and collectively decide on financial matters.
Among the state leaders present were Sarawak Deputy Premier Datuk Amar Douglas Uggah Embas, representing Sarawak Premier Tan Sri Abang Johari Tun Openg, and Sabah Deputy Chief Minister Datuk Seri Masidi Manjun, representing Sabah Chief Minister Datuk Seri Hajiji Noor. Also present were the chief ministers and Mentris Besar from the peninsula states. - Bernama
