Idham Razak of Universiti Teknologi Mara (UiTM) described the government’s 3.5% fiscal deficit target for next year as realistic, given its continued progress in fiscal consolidation and improving revenue.
He said that with stable economic growth and the implementation of the Fiscal Responsibility Act (FRA), Malaysia was now in a strong position to meet that target despite global uncertainties.
“The government has managed to sustain social assistance and development spending without compromising its fiscal position.
“This shows that fiscal policy is now more structured and data-driven, rather than relying solely on expansionary measures,” he told FMT.
Goh Lim Thye of Universiti Malaya (UM) said the 3.5% deficit goal was attainable if the government maintained its momentum for fiscal reforms, including subsidy rationalisation and broadening the tax base.
He cited the Budi Madani RON95 initiative, which replaced blanket fuel subsidies, as proof of the government’s determination to plug leakages without undermining public welfare.
“This approach is not just about savings – it’s about realigning fiscal priorities to ensure that public resources truly reach the deserving groups, thereby strengthening the nation’s social safety net,” he said.
Goh also said that the rollout of e-invoicing, growth in non-tax revenue, and projected gross domestic product (GDP) expansion of 4%-4.5% would give the government room to balance economic growth with fiscal stability.
Improved public procurement
In terms of governance, both economists agreed that the FRA and improvements to the public procurement system would serve as key pillars for greater transparency and efficiency in managing public finances.
Idham said the FRA would provide a disciplined spending framework with clear deficit and debt guidelines, while the new procurement system ensures that every government project is evaluated based on transparency and impact.
“Procurement reforms through digitalisation and open tenders will speed up project implementation and reduce leakages. This ensures that every ringgit spent delivers optimal and high-impact results,” he said.
Meanwhile, Goh said enhanced transparency would strengthen investor confidence and bolster Malaysia’s standing with international rating agencies, which currently rate the country as stable at A- (S&P), A3 (Moody’s) and BBB+ (Fitch Ratings).
“If policy consistency is maintained, Malaysia can not only manage its debt and deficit effectively, but also enjoy lower financing costs in global markets,” he said.
Where fiscal discipline meets impact
The economists also said that fiscal discipline did not mean cutting public assistance, but rather ensuring that every ringgit spent is targeted and delivers long-term value.
According to Goh, the best strategy is through “smart fiscal consolidation” – reducing unproductive spending while maintaining investments in education, healthcare, housing, and the digital economy.
With a total allocation of RM470 billion, Budget 2026 also introduces long-term measures such as a carbon tax and the Green Investment Tax Allowance.
It also provides tax deductions for artificial intelligence and cybersecurity training for small and medium businesses, aligning with Malaysia’s transition towards a green and digital economy.
Idham said this approach marked Malaysia’s entry into a new post-pandemic phase – shifting from spending-focused strategies to a culture of fiscal discipline, sustainability, and accountability.
“Budget 2026 is not just about figures or allocations – it represents a new fiscal culture which ensures that every decision made truly benefits the people and the economy,” he said.