MALAYSIA’s financial strategy is carefully balanced, ensuring sustained growth without compromising on fiscal discipline through targeted economic reforms.
The federal government’s revenue collection in 2024 is expected to be at RM322.1bil or 16.5% of gross domestic product (GDP), up from its initial estimate of RM307.6bil.
This increase stems from measures in Budget 2024, including raising the service tax from 6% to 8%, implementing a capital gains tax on unlisted shares and improving tax governance.
Additionally, non-tax revenue is projected to rise through one-off proceeds from land disposals and asset recovery.
Total expenditure for 2024 has also been revised to RM407.5bil from the initial estimate of RM393.8bil, reflecting the government’s commitment to economic growth and social welfare.
Operating expenditure (OE) is estimated to increase by 5.8% or RM17.7bil due to higher subsidies and social assistance, emoluments, retirement charges as well as debt service charges.
Savings from subsidy reforms for chicken, electricity and diesel have been redirected to cash assistance programmes for the rakyat.
Development expenditure (DE) is expected to decrease to RM86bil or 4.4% of GDP, but remains above the statutory limit of 3%.
Overall, the rise in expenditure will be offset by higher revenue collection, keeping the fiscal deficit at the targeted 4.3% of GDP. Thus, no additional borrowing requirement is projected for the year.
Consequently, the primary balance, after excluding debt service charges, is anticipated to consolidate to a deficit of 1.7% of GDP.
For 2025, the government is projecting revenue to grow by 5.5% to RM339.7bil or 16.3% of GDP, driven by higher direct and indirect tax collections.
This is supported by economic growth, higher corporate earnings, and the rollout of the e-invoice system, coupled with the full-year implementation of the higher service tax rate and anticipated higher consumer spending.
Meanwhile, non-tax revenue is projected to decrease slightly to RM80.7bil on account of lower proceeds from investment income, while dividend from Petroliam Nasional Bhd is expected to remain at RM32bil.
Total expenditure in 2025 is projected to be higher at RM421bil or 20.2% of GDP, primarily due to higher public sector salaries, retirement charges, and debt servicing.
The OE is expected to amount to RM335bil, equivalent to 16.1% of GDP, while DE is projected to sustain at RM86bil or 4.1% of GDP.
The government will optimise spending, cut subsidies and improve infrastructure, focusing on economic growth and quality of life.
The fiscal deficit is targeted to reduce further to 3.8% of GDP in 2025 and consequently, the primary balance is forecast to record a lower deficit of 1.2% of GDP.
In the medium term from 2025 to 2027, the government forecasts total revenue to reach RM1.06 trillion (15.7% of GDP), driven by non-petroleum revenue of RM901.3bil (13.4% of GDP) and petroleum-related income of RM153.7bil (2.3% of GDP), based on a GDP growth of 4.9% and oil prices averaging US$80 per barrel.
Expenditure is projected at RM1.289 trillion (19.2% of GDP), with RM1.043 trillion for OE and RM246bil for DE.
The fiscal deficit is expected to average 3.5% of GDP over this period.
Under the Madani Economic Framework, the government aims to boost economic competitiveness and inclusivity while practicing fiscal discipline.
The goal is to reduce the fiscal deficit to under 3% of GDP.
