Govt allocates RM470 billion in Budget 2026, up 1.7 per cent from revised Budget 2025

KUALA LUMPUR - The government has allocated a total of RM470 billion under Budget 2026, representing 19.7 per cent of gross domestic product (GDP), said the Finance Ministry.

It was an increase of 1.7 per cent from the revised Budget 2025, it said.

In its Fiscal Outlook and Federal Government Revenue Estimates 2026 report released today, the Finance Ministry said the government has revised the 2025 total expenditure to RM412.1 billion, down from the approved allocation of RM421 billion announced in Budget 2025.

Regarding the RM419.2 billion allocation in Budget 2026, the Finance Ministry said RM338.2 billion, or 80.7 per cent of the budget, is designated for operating expenses (OE), with the remaining RM81 billion allocated for development expenses (DE).

The ministry said that the bulk of the allocation, amounting to 32.1 per cent of the total, is channelled to the Education Ministry, Health Ministry and Defence Ministry.

"In terms of sectoral allocation, the social sector will receive RM155.9 billion, or 37.2 per cent of the overall budget, followed by the economy (RM58.9 billion, or 14.1 per cent), security (RM44.5 billion, or 10.6 per cent) and general administration (RM20.7 billion, or 4.9 per cent) sectors.

"The balance of 33.2 per cent is budgeted under charged expenditures and transfer payments,” it said.

The Finance Ministry said that the budgeted OE is equivalent to 15.9 per cent of GDP, representing an increase of 1.8 per cent from the revised Budget 2025.

The ministry highlighted that emoluments remain the largest component of OE, projected to grow by 5.6 per cent to RM109.4 billion, mainly attributed to the second phase of the Public Service Remuneration System (SSPA) implementation, which includes a seven per cent basic salary increase for civil servants in Grade 15 and below.

It elaborated that subsidies and social assistance, which constitute 14.5 per cent of OE, are projected to decrease by 14.1 per cent to RM49 billion in 2026.

"The decline in subsidies and social assistance is mainly due to lower global commodity prices and subsidy rationalisation efforts, which include implementation of the Budi95 programme,” it said.

The Finance Ministry also revealed that the government will provide a total of RM1 billion in loans through DE to improve infrastructure and enhance the quality of life of the rakyat next year.

It added that the revision of 2025’s expenditure to RM412.1 billion from RM421 billion earlier was due to optimisation of emoluments and lower debt service charges (DSC), as well as a lesser disbursement for DE.

Of this revised total, 80.6 per cent is allocated to OE, while the remaining 19.4 per cent has been earmarked for DE.

The total OE in 2025 is estimated at RM332.1 billion compared with the initial allocation of RM335 billion.

"This adjustment is mainly due to the optimisation of emoluments, retirement charges, DSC and grants to statutory bodies,” it said.

The Finance Ministry added that the DE in 2025 is estimated to decrease by 4.8 per cent to RM80 billion, primarily due to lower spending requirements in the economic sector. - BERNAMA