WORLD BANK POSITIVE ON MALAYSIA'S FISCAL CONSOLIDATION STRATEGY

By Harizah Hanim Mohamed

KUALA LUMPUR, Oct 13 (Bernama) -- The World Bank acknowledged the government’s efforts to safeguard Malaysia’s long-term fiscal sustainability but maintained a cautious stance on the lower development expenditure (DE) outlined in Budget 2026.

World Bank lead economist for Malaysia Dr Apurva Sanghi emphasised the benefits of budget consolidation -- reducing government deficit and debt -- while highlighting the importance of a balanced approach.

“If you take a longer-term perspective, compare the 12th Malaysia Plan (MP) to the 13th MP, we find that DE has actually come down.

“The average annual DE in the 12th MP was 4.4 per cent of gross domestic product and in the 13th MP, the new one, is 3.3 per cent per year,” he told Bernama on the sidelines of the 2026 Post-Budget Debate, organised by the Malaysian Economic Association, here today.

Sanghi was one of the panellists at the session in conjunction with Budget 2026, tabled last Friday.

Among other panellists were Treasury secretary-general Datuk Johan Mahmood Merican, MNRB Holdings Bhd senior vice president and group chief investment officer Durraini Baharuddin, Associate Professor of Practice at the University of Nottingham Malaysia Dr Tricia Yeoh and Tratax Sdn Bhd executive director Thenesh Kannaa.

In 2024, the government had set aside RM90 billion for the country’s DE. In Budget 2026, Prime Minister Datuk Seri Anwar Ibrahim announced an allocation of RM81 billion for the federal DE

“Development spending has come down, and that is one way in which the government is meeting its fiscal deficit target, but we believe that cutting development is not the ideal way to meet it,” said Sanghi.

Meanwhile, commenting on how Budget 2026 would help local companies to brace global economic slowdown and uncertainties, Johan said Budget 2026 places a clear emphasis on priority sectors and providing financing support for small and medium enterprises, aligning its strategy with the MADANI Economy framework and the New Industrial Master Plan (2030).

“There is a strong focus across various sectors, while not immediately apparent, from the Budget 2026 main speech. The prime minister highlighted semiconductors, an area receiving not just government allocation, but also funding and investments from government-linked investment companies,” he said.

Johan also said that other areas of emphasis include energy transition towards more renewable sources, as well as the start-up ecosystem.

-- BERNAMA