PETALING JAYA: The federal government has allocated RM459.84 billion for Budget 2027, an increase of about RM40.6 billion from the RM419.2 billion allocated in 2026.

Operating expenditure accounts for RM376.8 billion, or about 82% of the total budget, while RM83 billion has been set aside for development expenditure.

According to the Finance Ministry’s 2027 Fiscal Outlook Report, operating expenditure will focus on essential public services and targeted assistance for Malaysians, including social aid and subsidies.

Revenue is projected to increase by 4.7% to RM380.8 billion in 2027, supported by expectations of resilient but moderating economic growth.

Taxes and non-tax revenue are expected to finance 82.8% of the budget, while the remaining 17.2% will come from borrowings and the use of government assets.

Social sector receives largest operating allocation

The social sector will receive the largest share of operating expenditure at RM161.6 billion, followed by the economic sector at RM59.4 billion, security at RM46 billion and general administration at RM23.4 billion.

The Treasury said spending would remain focused on people-centric projects and programmes, with 30.2% of the total allocation channelled to the Education, Health and Defence Ministries.

The allocation for subsidies and social assistance is expected to decline by 2.3% to RM72.7 billion, reflecting the implementation of targeted subsidy schemes and anticipated improvements in subsidy management.

Salaries remain largest operating expense

Emoluments remain the largest component of operating expenditure, accounting for RM91.56 billion, or 24.3% of the total.

Subsidies and social assistance make up the second-largest component at RM59.53 billion, representing 15.8%.

The report attributed the increase in personnel-related spending to annual salary increments and additional allocations to strengthen staffing in the health and education sectors.

Meanwhile, retirement charges are projected to rise by 4.24% to RM44.6 billion, driven by growing pension-related commitments as the number of pensioners and beneficiaries increases.

Development expenditure is set at RM83 billion, a modest increase from RM81 billion in 2026, underscoring the government’s continued commitment to funding development projects alongside essential public services.