From Mazli Noor
The government’s announcement of RM15 billion in cash aid for 2026 through the expanded Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) programmes represents an unprecedented commitment to direct aid for Malaysians.
While we acknowledge this noble effort to support families who are struggling, we must ask ourselves a difficult question: what does this growing dependence on cash transfers tell us about the underlying health of our economy and the rakyat’s wellbeing?
Understanding the historical context
Malaysia’s very first universal cash assistance programme was launched in 2012, when the Bantuan Rakyat 1Malaysia (BR1M) was announced with a specific purpose: cushioning the impact of the proposed goods and services tax (GST) on all lower-income households nationwide.
The programme was meticulously thought through, targeting families earning below RM4,000 a month, with assistance ranging from RM900 to RM1,200. This represented sound policy – broad-based taxation balanced with targeted relief for those who needed it most.
The data from that period tells it all. In the months following GST’s implementation, the consumer price index (CPI) rose steadily to peak at 3.3% in July 2015 before reconciling to 2.7% year-on-year that December, for a four-year average of 2.25%.
Bank Negara Malaysia’s analysis revealed that the proportion of goods in the CPI basket experiencing inflation above 4% jumped from 11% before GST to 32% in the second quarter of 2015, eventually reaching 41% by year’s end.
Having said that, GST’s implementation itself only contributed approximately 0.7 percentage points to headline inflation, while delivering RM184.8 billion in revenue over the three full years of its implementation, or approximately 24% of total government income within that period.
This wasn’t merely taxation for its own sake, but a mechanism to broaden the revenue base, while providing targeted support to those most vulnerable to price increases.
The trajectory of dependency
Today, we find ourselves in a different situation. The cost of BR1M grew from RM2.6 billion in 2012 to RM6.3 billion by 2017, to RM8 billion following its transformation into STR in 2023. Combined with SARA today, which notably extends assistance to all income groups aged 18 and above, we are looking at a RM15 billion expenditure in 2026.
If this trend continues, projections suggest it will reach RM26 billion by 2030. This is neither sustainable nor just a fiscal concern: it is a red flag that something fundamental in our economic structure is failing the rakyat.
Beyond the government figures lie numerous stories of real struggle. As of August 2025, 4.63 million Employees Provident Fund contributors have withdrawn RM14.79 billion from their Account 3 since the Flexible Account was introduced in May 2024. These are not casual withdrawals. They represent people sacrificing their retirement security to meet today’s needs.
The immense growth in “buy now, pay later” schemes tell a similar story: RM9.3 billion across 102.6 million transactions by August 2025, up sharply from RM7.1 billion in late 2024. Household debt now stands at RM1.6 trillion, or 84% of our GDP.
These figures paint a picture of families under immense pressure, exhausting every available option to try and maintain a reasonable standard of living.
What we must therefore confront is the fact that while cash assistance programmes provide temporary relief, they do not address why so many Malaysians still struggle in the first place.
Here is where we must be precise. Controlled inflation does not equal an affordable cost of living. Both are distinct challenges requiring different solutions. A family can face rising expenses for housing, healthcare, education and food even as headline inflation appears benign. This is the reality that many Malaysians are facing.
A more comprehensive path forward
The Madani Economy framework includes valuable initiatives to “raise the floor”, i.e. improving job quality, expanding social protection, developing human capital and upgrading basic infrastructure. These are all worthwhile goals that deserve support. However, they primarily address the demand side of the equation.
Economic balance requires equal attention to supply. Increasing incomes without addressing structural productivity creates a circular problem. Higher wages lead to higher costs, which erode the benefit of wage increases. We’ve seen this pattern before, and we risk repeating it.
The solution is not complicated, but requires political will to follow through. Malaysia’s productivity growth rate averaged less than 2.0% in 2025, well below the 3.8% standard set by the International Labour Organization for upper-middle-income countries. Our key sectors, namely construction, manufacturing and services, all offer substantial room for improvement.
Genuine productivity gains create a virtuous cycle. Increased output per worker enables sustainable wage growth, greater production helps stabilise prices and improved competitiveness strengthens our economy’s foundation. This is how we build prosperity that endures beyond every subsequent election.
Moving forward with purpose
Cash assistance programmes serve a vital purpose in supporting families through difficult times. What we must caution against is building a habit of treating the symptoms while ignoring the disease.
Malaysians deserve better than an ever-growing dependence on handouts. They deserve an economy that works for them, where fair wages meet reasonable costs, where saving for the future doesn’t require choosing between retirement security and today’s necessities.
This requires a comprehensive strategy to boost national productivity and production capacity. It demands investment in skills training, infrastructure, technology adoption and removing regulatory barriers that stifle business growth and innovation.
It means creating conditions where Malaysian businesses can thrive and compete globally, generating quality jobs and raising incomes organically.
The government has shown it can mobilise resources. RM15 billion in cash assistance proves this. The question is whether we’ll continue choosing temporary relief over lasting solutions.
The rakyat need both immediate support and a credible path to economic security. They deserve leadership willing to make difficult choices today for a stronger tomorrow.
Cash assistance programmes are compassionate, but they are not enough. Without fundamental reforms to boost productivity and control living costs, we are merely subsidising an increasingly unaffordable status quo.
Malaysians deserve better – and our economy is capable of delivering it, if we have the courage to pursue the right policies.
Mazli Noor serves on the boards of several public and private companies and is an FMT reader.
The views expressed are those of the writer and do not necessarily reflect those of FMT.