Malaysia budget 2027: PM Anwar spends as he enters final stretch before general election

KUALA LUMPUR - Prime Minister Anwar Ibrahim tabled on Oct 9 an expansionary budget as he enters the final year of a tumultuous term as Malaysia’s leader, which has seen his Pakatan Harapan (PH) coalition ceding ground not just to the opposition, but want-away ally UMNO. 

The proposed spending of RM459.8 billion (S$143.4 billion) for 2027 is nearly 10 per cent more than the RM419.2 billion outlined for 2026, signalling a push to boost the economy typical of an “election budget”.

That Anwar had brought forward to Sept 1 an increase in subsidised fuel quotas originally meant to be announced in Budget 2027 was a clear signal, said analysts, that “the political calendar is shorter than the official deadline” for the 16th general election (GE). The GE is due by February 2028.

“A government willing to break its own Budget sequencing for a measure this cheap is optimising for the calendar, not the ledger,” said Kenanga Investment Bank in a pre-Budget report issued on Sept 21.

The government expects growth to moderate to between 4.2 to 5.2 per cent in 2027, from 4.8 to 5.3% in 2026 and 5.2% in 2025. 

Much of the Budget 2027 increase is set to be paid from a rise in both income tax (RM199.9 billion, 4.6% higher) and the Sales and Services Tax (up 9.5% to RM73.3 billion). The SST consumption levy has progressively captured more items since Anwar, who is also finance minister, took power in 2022.

The projected fiscal deficit for 2027 will drop to 3.3% of gross domestic product, down from 3.6% for 2026 and 3.7% in 2025.

The Anwar administration had planned for a 3.5% deficit for 2026 but soaring fuel prices pushed the fuel subsidy bill to RM40 billion, pushing total expenditure to RM444.1 billion.

The subsidy bill is expected to decline slightly in 2027, as the government rolls out further targeting mechanisms which have so far seen subsidised fuel quotas being rolled out in since 2024.

Some RM83 billion has been earmarked for development expenditure in Budget 2027, a modest increase from the RM81 billion for 2026.

Anwar’s ruling partner UMNO, which leads the Barisan Nasional (BN) coalition, has since September openly called for early polls despite the GE not due for nearly 18 months. Anwar could table another budget at the end of 2027 but his government would not be able to implement it beyond the first few weeks of 2028.

Defeating Budget 2027 would be the most direct way to force a snap election, but BN’s 30 MPs alone will not be enough to deprive Anwar of a parliamentary majority. Asides BN, the government has 119 MPs in the 222-strong chamber with four seats vacant.

UMNO’s push, backed by Parti Islam SeMalaysia (PAS), the nation’s largest party, comes after a torrid year for PH. Anwar’s coalition has suffered losses in three consecutive state elections, in Sabah in November, Johor in July and Negeri Sembilan in August, where the UMNO-PAS Malay Unity electoral pact secured a two-thirds supermajority.

The next two states to hold elections are Melaka on Nov 14 and Sarawak - due by April.

This story is developing.