Govt plans to reform development expenditure allocation based on states’ needs, says Economy Ministry

KUALA LUMPUR, Oct 30 — The Malaysian government is set to overhaul its approach to federal development expenditure, shifting away from a spending-based system towards one that emphasizes equity and efficiency, aiming to bridge regional productivity gaps. The Economy Ministry emphasized that the primary goal is to reduce the productivity gap between underdeveloped states and the national average.

According to the ministry, an increase in allocations for Budget 2027 does not necessarily indicate underperformance by states with smaller allocations; rather, these states might possess greater potential for diversifying their local economies using existing resources. Addressing the queries of Datuk Seri Dr Ahmad Samsuri Mokhtar (PN-Kemaman) regarding narrowing regional productivity gaps and mechanisms for allocating development funds based on states' needs, the ministry highlighted that significant economic disparities between states could undermine national competitiveness.

The ministry warned that if left unchecked, regions with lower production capacities will perpetually widen the productivity gap. Consequently, federal development allocations must function as a vital fiscal stimulus to tackle infrastructure deficiencies, technological gaps, and labor market challenges in less-developed states, contributing to a sustainable regional economic convergence.