PETALING JAYA: Optimising its expenditure for 2027, especially to foot fuel subsidies, will be the priority for the government, says an economist.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the rise in global crude oil prices has led to higher fuel subsidies.
“At this juncture, the government remains committed to maintaining the fuel subsidies structure, and therefore, the allocation for fuel subsidies has gone above the budgeted figure,” he said.
“Hence, the government needs to relook at the current spending programme and look for ways to optimise, where ultimately it will make way for fuel subsidy allocation,” he added.
The Finance Ministry recently said that the government’s subsidy bill for RON95 petrol and diesel is projected to remain high at about RM3.5bil a month at current market prices, amid the ongoing conflict in the Middle East.
Monthly subsidies for RON95 petrol and diesel surged to RM5bil in March 2026 and peaked at RM7.5bil in April 2026, compared with RM700mil in January 2026, the ministry said.
“In Q12026 they already achieved 3.3% of the gross domestic product (GDP). So I suppose with the optimisation of expenditure, they might get the target this year.
“Next year can be quite tricky. If global growth slows materially, then the government may need to pump prime the economy,” he said.
The target was to narrow the fiscal deficit to 3.5% of GDP in 2026, down from the estimated 3.8% in 2025.
Economist Prof Emeritus Dr Barjoyai Bardai said the circular “Guidelines for the Preparation of Proposed Federal Expenditure Estimates for 2027” outlines the underlying economic assumptions and the national outlook used to prepare the budgets of all ministries, institutions, and government agencies. It also sets out the rules and requirements relating to expenditure planning and participation by each agency.
“Overall, the Budget 2027 is expected to be relatively stable, reflecting the economic conditions of 2026.
“It does not specifically factor in the developments or impacts of the Middle East geopolitical crisis at this stage. “However, this may be reviewed later should the situation require it, as its economic impact on Malaysia has not yet been significantly felt,” he said.
Federation of Malaysian Consumers Associations (Fomca) secretary-general Dr Saravanan Thambirajah said it is cognisant of the need for prudent fiscal management and supports efforts to eliminate programmes that are non-critical, duplicated, or have failed to deliver meaningful outcomes.
Saravanan, however, cautioned that expenditure rationalisation must be undertaken carefully and the people’s welfare must be taken care of.
“Any reduction in spending should focus on inefficiencies, overlaps, and low-impact projects rather than programmes that contribute directly to the well-being of consumers and the quality of public services,” he added.
