Budget 2027 Must Not Become a Political Casualty

When politics threatens to overshadow the budget

In a recent episode of Keluar Sekejap, Khairy Jamaluddin raised an intriguing possibility: if there were to be a “hacking from the rooftop”, it could conceivably come through the proposed Budget 2027 failing to secure passage in Parliament.

It was a passing observation, rather than the subject of the programme. Yet it raises a question that deserves serious consideration.

If a national budget were to become a casualty of political manoeuvring, it would be deeply unfortunate. Parliament should scrutinise, challenge and improve a Budget. That is its constitutional role. But deliberately preventing a government from having an approved financial plan would be a very different matter.

It would suggest that politics is beginning to lose sight of its fundamental purpose — to administer the country responsibly — and becoming increasingly preoccupied with the pursuit of power.

That is precisely what Malaysia can least afford as Budget 2027 approaches.

This is not an ordinary budget

The MADANI Government should be given credit for making measurable progress in fiscal consolidation.

The fiscal deficit has declined from 5.0% of GDP in 2023 to 4.1% in 2024 and 3.7% in 2025. New federal borrowing has also fallen, from RM92.6 billion in 2023 to RM75.6 billion in 2025. The Government has enacted the Public Finance and Fiscal Responsibility Act and the Government Procurement Act, while targeted subsidy reforms have generated reported savings of about RM15.5 billion annually.

These are significant achievements. But the irony is that fiscal consolidation has made Budget 2027 more, rather than less, important.

Malaysia is entering a period in which several large and semi-structural expenditure pressures can rise simultaneously, while the easiest sources of additional revenue are becoming increasingly difficult to exploit.

The Government therefore has to protect households from the energy and cost-of-living shock while continuing to consolidate its finances and invest in a higher-value economy.

Fifteen pressures competing for the same ringgit

Budget 2027 has to juggle at least 15 major challenges: 

1. Global oil and energy crisis, which can dramatically increase Malaysia's subsidy bill. The Government says the 2026 fuel subsidy bill could reach RM40 billion as oil prices have surged above US$100 a barrel.
2. Subsidy rationalisation, where savings are necessary but excessive pass-through to consumers could intensify the cost-of-living burden.
3. Fiscal consolidation, because debt and debt-servicing commitments leave progressively less room for discretionary spending.
4. Household purchasing power, particularly when the price level has risen faster than the ability of many households to improve their disposable income.
5. Household indebtedness, which limits the capacity of consumers to absorb another substantial increase in living costs.
6. Social protection, including the growing fiscal cost of assisting vulnerable households.
7. Ageing population, which will increase demands on healthcare, pensions and social protection.
8. Civil-service remuneration and pensions, following efforts to improve public-sector pay while containing recurrent expenditure.
9. Healthcare and education, where reducing expenditure indiscriminately could undermine the country's long-term human-capital development.
10. SME survival and investment, as smaller businesses face rising labour, utility, logistics, financing and compliance costs.
11. Global trade fragmentation and tariffs, which threaten Malaysia's highly trade-dependent economy.
12. China's economic slowdown and industrial overcapacity, which could increase competitive pressure on Malaysian manufacturers.
13. Semiconductor and AI investment, an enormous opportunity but also an area exposed to global technology cycles and possible investment corrections.
14. Climate, food and water security, which increasingly require government spending before as well as after a crisis.
15. Defence, infrastructure and national security, all of which require greater resources in an increasingly uncertain geopolitical environment.

None of these can be dealt with in isolation.

The fiscal problem is increasingly about allocation

This is why the Government's own Pre-Budget Statement is revealing.

It emphasises better spending efficiency, reducing leakages and overlapping programmes, improving tax compliance and ensuring that every ringgit spent delivers value. It also recognises that implementation delays and delivery performance must be addressed.

The implication is important. Malaysia's fiscal challenge is increasingly becoming an allocation problem, not simply a revenue problem. The question is no longer merely how to raise another ringgit. It is where that ringgit should go.

Should it protect households from higher energy prices? Support SMEs? Build infrastructure? Finance healthcare? Strengthen education? Improve defence? Reduce debt? Or invest in technology and productivity that can generate tomorrow's income?

There are no painless answers. 

Political stability is therefore an economic asset

This is why political stability matters.

Anwar Ibrahim began the Unity Government by prioritising political stability and building a broad multi-coalition administration. The subsequent emphasis was placed more heavily on economic and fiscal reform than on some of the more politically attractive institutional reforms.

Whatever one's assessment of the pace or depth of those reforms, stability provided the Government with the ability to undertake difficult measures.

Ahmad Zahid Hamidi has now repeatedly reaffirmed that BN remains committed to the Unity Government until the end of the term and that differences within government should be handled professionally. 

That should be welcomed.

Budget 2027 should not become a test of which political faction can extract the greatest advantage from disagreement. It should be a test of whether the Government, Parliament and the various political parties can collectively deal with an unusually difficult economic environment.

Do not drag the machinery of government into politics

Recent exchanges involving the Ministry of Finance and the Ministry of Rural and Regional Development demonstrate how easily administrative and budgetary matters can become political.

The facts themselves illustrate why caution is needed.

MOF says KKDW's rural-road expenditure had exceeded its approved annual allocation in several preceding years and that RM300 million in additional allocation had subsequently been approved to help address contractor arrears. KKDW, meanwhile, has pointed to a much larger gap between projects approved and annual allocations over a longer period.

There may be legitimate questions to answer on both sides. But these should be resolved through the established financial and administrative processes, not through public confrontation.

It is normal for actual expenditure to differ from an original annual budget. Projects are implemented over different schedules, allocations can be transferred or supplemented, and expenditure can be carried forward. Government financial controls exist precisely to manage these circumstances.

Malaysia's Treasury system also provides formal controls over federal expenditure, including the approval and issuance of warrants and the responsibilities of controlling officers. Therefore, disagreements over expenditure should not automatically become accusations of political obstruction or administrative failure.

Civil service neutrality must be protected

Malaysia has long taken pride in the professionalism and impartiality of its civil service. That neutrality is an asset that belongs to the country, not to any particular government. Civil servants should therefore be careful not to be drawn into political arguments or encouraged by political “ceplos” to depart from established administrative practices.

The same restraint should be expected from politicians. Politicians would understandably object if civil servants attempted to determine the political direction of the Budget. 

Civil servants should likewise expect politicians to respect the financial procedures through which Parliament's approved allocations are administered. The machinery of government must remain the machinery of government. 

The bigger test is whether Malaysia can rise above the politics of the moment

Budget 2027 deserves vigorous parliamentary scrutiny. Its assumptions should be challenged. Its allocations should be debated. Its priorities should be questioned. Waste should be exposed and weak programmes should be rejected.

But there is a fundamental difference between scrutinising a Budget and sabotaging its passage. The former is democracy. The latter risks turning the country's financial administration into collateral damage in a contest for political power.

Malaysia is facing too many simultaneous pressures for that. The Government needs the cooperation of politicians, civil servants, businesses, SMEs and citizens. It needs difficult decisions to be made early, intelligently and transparently. It needs Parliament to scrutinise those decisions without allowing the national interest to disappear beneath partisan calculations.

The real test of Malaysian politics is therefore not whether one side can bring down another. It is whether political differences can be managed without putting the country's economic and financial stability at risk.

Budget 2027 is ultimately not Anwar Ibrahim's Budget, BN's Budget, PH's Budget or the Opposition's Budget. 

It is Malaysia's Budget. 

And whatever political battles lie ahead, Malaysia cannot afford for the Budget to become their casualty.