Malaysia Targets 3.5 Per Cent Fiscal Deficit in 2026, Reflecting Stronger Financial Discipline
KUALA LUMPUR — The government expects Malaysia’s fiscal deficit to narrow further to 3.5 per cent in 2026, bringing it closer to the medium-term target of 3.0 per cent under the Public Finance and Fiscal Responsibility Act (FRA) 2023.
Second Finance Minister Amir Hamzah Azizan said the projected improvement reflects stronger fiscal discipline and more prudent financial management by the government.
He explained that fiscal consolidation has been implemented in stages to strike a balance between reducing the deficit and maintaining expansionary policies that support economic growth and national development.
“We have successfully reduced the fiscal deficit from 6.4 per cent in 2021 to 4.1 per cent in 2024, with a target of 3.8 per cent in 2025, before it is expected to decline further to 3.5 per cent in 2026 under Budget 2026,” he said.
He was speaking while winding up the debate on the motion of thanks for the Royal Address for the Ministry of Finance in Parliament today.
Amir Hamzah noted that the reduction was achieved through measures such as broadening the tax base, enhancing the Sales and Services Tax system, and rationalising subsidies, particularly for electricity, diesel and RON95.
He added that Malaysia’s fiscal reform efforts have also been recognised internationally, including by the International Monetary Fund in its December 2025 report.
Alongside fiscal consolidation, the minister said economic growth remained resilient despite global uncertainties, with gross domestic product (GDP) in 2025 estimated at 4.9 per cent.
Trade performance also remained strong, expanding by more than six per cent and reaching a record high of RM3 trillion.
According to Amir Hamzah, these achievements stem from the Madani Government’s comprehensive approach, which emphasises responsible economic management, business facilitation and investor-friendly policies.
He said international markets have acknowledged Malaysia’s progress, as reflected in rising investor confidence and improved competitiveness.
The ringgit strengthened to RM3.92 against the US dollar on January 28, 2026 — its best level in nearly eight years — while the FBM KLCI reached 1,771 points, the highest in more than seven years.
On capital flows, he noted that although foreign funds recorded an outflow of about US$5.2 billion from the equity market in 2025, the bond market attracted inflows of around US$6 billion.
“This overall trend indicates that Malaysia remains a stable and attractive investment destination, supported by growing confidence in the country’s economic direction,” he said.
He added that investor sentiment in January 2026 was particularly positive, with both the equity and bond markets recording inflows exceeding RM1 billion each.
-wilayah.com.my
