2027 budget must be matched by revenue, spending reforms, says think tank

The 2027 Malaysian budget proposes an increase from RM419.2 billion in 2026 to RM459.84 billion, a 10% rise. (Source: IDEAS) The Institute for Democracy and Economic Affairs (IDEAS) argues that this budget must be accompanied by significant revenue and spending reforms. IDEAS welcomes the projected deficit reduction to 3.3% of GDP in 2027, but warns that the unchanged tax-to-GDP ratio of 12.8% and the projected dip in federal revenue to 16.4% of GDP show limited progress in broadening the revenue base.

The think tank highlights the need for comprehensive tax reform and a transparent dividend framework, urging the government to balance revenue needs with Petronas' long-term sustainability. IDEAS also calls for better-targeted assistance for fuel subsidies, which are projected to remain high at RM40 billion, and questions whether a 2.6% increase in healthcare spending will suffice to cope with rising medical costs and workforce shortages.

The think tank questions the clarity of timelines for reforms like political financing legislation, a term limit for the Prime Minister, the separation of attorney-general and public prosecutor roles, and electoral reform, but supports efforts towards parliamentary autonomy and a proposed law reform commission. These reforms should be supported by transparent processes, meaningful public consultation, and stronger parliamentary oversight.

On federal-state relations, IDEAS welcomes higher allocations to Sabah and Sarawak, but stresses that sustained progress requires more than higher allocations in a single year, advocating for a fair, transparent, and predictable formula for federal transfers and special grants that better reflects the development needs of each state.