The opening of Budget 2026 was music to the ears of economists like me with very strong words rejecting the culture of reckless debt accumulation, combating wastage, leakages and corruption and abhorring, “the luxury of the elite paid for by the suffering of the people.”

The “difficult and long path of reform, strict fiscal discipline and institutional strengthening,” set out by the prime minister is exactly what the economy needs at this phase in the cycle and the government term.

The overall budget is lower than last year at RM419.2 billion. This is a surprise but reflects fiscal discipline and the possibility to keep spending within a lower budget due to savings primarily from subsidy rationalisation.

Adding GLICs, statutory bodies and GLCs puts in another RM50 billion but this is not federal budget expenditure, it is off-budget spending, pushing overall “mobilised” spending to RM470 billion from RM452 billion last year.

Some, such as the RM30 billion GEAR-up spending was previously announced.

The target for the deficit of 3.5% is achievable and the growth forecast of 4.0-4.5% is sensible and closer to the underlying potential of the economy.

There were no new taxes except the carbon tax which is unnecessary. However we must remember the hike in SST last year that will raise RM10 billion in 2026. So there is no need for new taxes.

Revenue is forecast to rise by almost that amount so the burden of other taxes will not increase.

The subsidy savings of RM15.5 billion is slightly lower than the RM17 billion touted before but it does offer resources that can be reallocated, thus avoiding new taxes and easing fiscal pressure. This is the benefit of rationalisation in practice.

The heavy spending into semiconductors, clean energy and digital infrastructure follows the plans of the 13th Malaysia Plan. It is expected but it remains to be seen whether such high government interference will crowd-in or crowd-out private investment.

This was a technocratic budget, good from an economic perspective in terms of fiscal management but it was not a people friendly budget with no obvious handouts in priorities such as health, education and social protection.

Health spending increased but far behind health price inflation, so the health ministry will need to continue on tight budgets and look for efficiencies.

The free education for students in households with less than RM2,700 per month is welcome but limited to only 5,800 people.

There was scope to provide free education to everyone and this was a missed opportunity.

The STR-SARA will extend to nine million people but the rates are unchanged so they will fall in spending power terms. Although more will be paid on a monthly basis which is good, the fact is that the poor will be worse off due to inflation.

Another universal payment will be made in February and this signals more of these during the year. These are small steps toward a universal basic income (UBI) but again there was nothing to address the pension crisis.

Although there was the usual long list of projects, what was unusual is that these are much more focussed on government priorities rather than unnecessary “boys toys” projects often seen in the past. This is very positive and signals fewer patronage cascades.

Two points to watch are first the MCMC “sovereign cloud” initiative which could be handled by the private sector and second, the TVET Council must remedy the underperforming training and skills environment and low-skilled outcomes of previous governments.

So technically very sound and good for economists but very little for the general public in terms of raising incomes.

The views expressed are those of the writer and do not necessarily reflect those of FMT.