KUALA LUMPUR, Oct 9 — The fiscal deficit is projected to narrow to 3.3 per cent of gross domestic product (GDP) in 2027, in line with the medium-term consolidation under the Public Finance and Fiscal Responsibility Act 2023, the Finance Ministry (MOF) said.
In its Fiscal Outlook and Federal Government Revenue Estimates 2027 released today, the MOF said 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 public-private partnership and co-investment arrangements will complement public financing for infrastructure and facilitate investment in areas with strong economic spillovers and long-term growth potential,” it said.
The Government-Linked Enterprises Activation and Reform Programme (GEAR-uP) initiatives will continue to complement broader efforts to mobilise investment towards strategic sectors in line with national development priorities.
Meanwhile, proceeds from Petroliam Nasional Bhd’s dividend are expected to be revised upward from RM20 billion to RM27 billion, in tandem with higher average global crude oil prices.
This has provided an important fiscal buffer to accommodate additional expenditure pressures, with federal government revenue estimated to increase by six per cent to RM363.6 billion in 2026, compared to the initial estimate.
“Taking into account the fiscal implications arising from external shocks and the measures undertaken to cushion the impact, the federal government's fiscal deficit for 2026 is revised to 3.6 per cent of GDP, compared with the original target of 3.5 per cent.
“This modest revision reflects the government's calibrated response in navigating external headwinds, while stronger revenue performance and expenditure reprioritisation have helped contain the impact on the overall fiscal position,” the MOF said.
Meanwhile, the escalation of the West Asia conflict and prolonged supply disruptions have placed significant pressure on global trade and the economy, thereby impacting the cost of living and fiscal resources.
It added that the government swiftly mobilised a coordinated whole-of-government response to safeguard the supply of energy and essential goods, contain cost pressures and strengthen economic resilience.
Key measures included continued targeted fuel subsidies and temporary adjustments to fuel quotas and controls to manage demand and curb leakages.
Similarly, over RM15 billion in financing support was made available to micro, small and medium enterprises (MSMEs) in 2026, including RM5 billion through Syarikat Jaminan Pembiayaan Perniagaan Bhd; RM5 billion of SME Stabilisation Relief Facility under Bank Negara Malaysia; and microfinancing facilities of more than RM5 billion channelled through various agencies and development financial institutions.
These efforts were complemented by expenditure reprioritisation to contain the fiscal impact of higher global crude oil prices, which led to an increase in fuel subsidies to RM40 billion.
After domestic energy supplies stabilised, the monthly quota for BUDI95 was restored to 300 litres, effective September 1, 2026.
The electricity bill assistance was also expanded, with the exemption threshold raised to 800 kilowatt-hours (kWh) per month until the end of 2026, providing additional relief to households amid higher energy costs.
Despite the challenging global fiscal environment, the MOF said the government remains committed to maintaining fiscal discipline and keeping the medium-term consolidation path on track.
Borrowing requirements will continue to be managed prudently in line with financing needs, supporting fiscal resilience and preserving policy space over the medium term.
Moving forward, the policy stance will strategically channel public resources toward productive investments in elevating the nation's long-term economic potential, while remaining highly responsive to the immediate needs of the rakyat.
“Amid a challenging global environment and elevated crude oil prices, the fiscal stance will remain supportive of growth, while maintaining the government’s commitment to fiscal consolidation.
“On the expenditure side, fiscal resources will continue to be allocated prudently and prioritised towards programmes with high economic and social returns,” it said.
