RM510 billion with a purpose: PMX's budget with bite

Some budgets simply distribute money. Others try to please everyone. And then there are budgets that have the courage to make choices. The MADANI Budget 2027 belongs to the third category.

With a total economic commitment of RM510 billion, the MADANI government's fifth budget is notable for more than its size. More compelling is the increasingly clear economic approach of Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim: helping Malaysians today while having the courage to correct structural weaknesses in the economy for tomorrow.

For that reason, Budget 2027 deserves to be called a budget with bite. Its bite lies not in rhetoric but in the government's willingness to pursue objectives often considered difficult to achieve simultaneously: increasing expenditure, expanding assistance to the public, raising the wage floor, stimulating investment and continuing to reduce the fiscal deficit.

The government is mobilising RM510 billion in total economic resources, compared with RM470 billion previously. Of that amount, RM376.8 billion is allocated to federal operating expenditure and RM83 billion to development expenditure. The remainder is to be mobilised through investments by government-linked investment companies (GLICs), public-private partnerships, statutory bodies and companies under the Minister of Finance Incorporated.

Put simply, the government has not chosen a defensive economic course. Instead, it is pressing the accelerator on growth. More important, it is doing so without losing control of the fiscal steering wheel.

The national deficit, which stood at 5.5 per cent in 2022, remains on a downward trajectory and is targeted to reach 3.3 per cent in 2027 before moving toward 3 per cent in 2028. The ratio of federal government debt to gross domestic product is also expected to decline to 63.7 per cent in 2027, from 65.2 per cent in 2025.

This is where the real bite of PMX's approach becomes apparent. Fiscal discipline does not mean indiscriminately cutting assistance or sacrificing the public in the name of financial figures. Instead, reforms are used to create fiscal space so that more benefits can be returned to Malaysians.

Assistance made wider

The clearest example is the cost of living. More than RM80 billion is allocated to subsidies, assistance and incentives. Funding for Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah rises to RM16 billion. STR recipients may receive up to RM150 a month, or RM1,800 a year, through SARA, while SARA MADANI is also extended to millions of Malaysians, including those in the M40 middle-income group.

This is no longer a narrow approach to welfare. It is a form of fiscal redistribution, in which financial space generated through reforms and better targeting is returned to those who need it.

More boldly still, Budget 2027 begins to confront a root cause of the cost-of-living problem: incomes that are too low. The minimum wage will rise from RM1,700 to RM2,000 beginning in June 2027, affecting more than four million workers. The government is also introducing a starting minimum wage of RM2,500 for semi-skilled jobs and graduates.

This is a significant step. Malaysia cannot indefinitely aspire to become an advanced economy while relying on a low-wage model. The country wants to attract semiconductor, artificial intelligence, aerospace, digital technology and data centre industries. At the same time, it cannot allow educated workers to continue struggling with wages that fail to reflect their qualifications. The budget signals that the era of competing on cheap labour must gradually come to an end.

The M40 group also gains some breathing room. The individual tax relief limit rises from RM9,000 to RM12,000, while tax rates in several income brackets are reduced by one percentage point. The government estimates that these measures will provide up to RM1,600 in additional disposable income to about five million taxpayers.

Wealth has to be created

But a country cannot become wealthy merely by distributing assistance. Wealth must be created. That is why another strength of Budget 2027 is its effort to mobilise productive investment and high-value industries. Through the Government-Linked Enterprises Activation and Reform Programme (GEAR-uP), GLICs are mobilising RM25 billion in domestic investment.

Khazanah Nasional Berhad and Kumpulan Wang Persaraan (Diperbadankan), or KWAP, are providing RM1.2 billion to help local semiconductor companies move into higher-value segments of the value chain, while RM2.1 billion in funding supports mid-tier companies in the electrical and electronics, digital, aerospace and medical device sectors.

This approach matters because Malaysia does not need investment that merely builds factories. It needs investment that creates technology, expertise, local suppliers, skilled jobs and higher wages.

That is also why the RM8 billion allocation for technical and vocational education and training is so strategic. The Human Resource Development Corporation alone is providing RM3 billion for three million skills-training opportunities. Investment means little if high-value jobs ultimately go to foreign workers because local talent is not prepared.

The next phase

From the perspective of political economy, Budget 2027 demonstrates the growing maturity of PMX's administration. If the MADANI government's early years focused heavily on restoring confidence, rationalising subsidies and correcting the fiscal position, Budget 2027 begins to reveal the next phase, in which the results of reform are translated into higher incomes, greater investment and stronger social protection.

This is the distinction between a populist budget and a budget with bite. A populist budget merely gives. A budget with bite gives, corrects and builds at the same time.

If the MADANI Economy was previously regarded as a framework, Budget 2027 is beginning to give that framework teeth. Malaysia needs a budget bold enough to bite into longstanding problems, defend its people and open the way for the country to seize new opportunities. That is the bite of Budget 2027.

Prof Dr Rusdi Omar is Dean of the Ghazali Shafie Graduate School of Government (GSGSG), Universiti Utara Malaysia (UUM). The views expressed here are his own.