Malaysia: Will Budget 2027 Brighten Anwar Ibrahim’s Electoral Prospects?

Prime Minister (PM) Anwar Ibrahim unveiled the Malaysian government’s fiscal budget for 2027 on 9 October 2026. The Budget is expected to be PM Anwar’s last before the next general election (GE16), scheduled to be held on or before February 2028. The PM’s Pakatan Harapan (PH) coalition is under tremendous political pressure following its dismal performance in three successive state elections in Sabah, Johor and Negeri Sembilan since November 2025. A fourth is scheduled to be held in Melaka on 14 November 2026. With all eyes on GE16, the Budget provides generous allocations to PH’s support base, notably the middle class in urban areas and to the Bumiputera community, from which PH has struggled to gain electoral support.

Overall, the Budget is mildly expansionary. That said, it remains fairly conservative, as both the deficit and public debt (as a share of gross domestic product, GDP) are respectively projected to decline slightly from 3.7 per cent to 3.3 per cent and from 64.0 per cent to 63.7 per cent. The total budget allocation for the Federal Government rose by MYR40.6 billion (or 9.7 per cent) to MYR459.8 billion for 2027. A big chunk of this increase can be traced to the allocation to the Ministry of Finance (MOF), which rose by MYR24.5 billion. The shares allocated to the two key ministries declined slightly: the Ministry of Health (15.8 per cent to 15.0 per cent) and the Ministry of Education (11.1 per cent to 10.4 per cent).

The significant increase in the budget allocation to the MOF is due to the higher provision for subsidies and cash aid, which rose from MYR29.8 billion in 2026 to MYR53 billion in 2027. This is primarily due to the under-estimation of the cost of fuel subsidies in 2026.

The most significant component of the 2027 budget is likely to be the government’s decision to continue its fuel subsidy policy, under which the petrol and diesel pump prices for citizens are maintained at MYR1.99 per litre and MYR2.20 per litre, respectively. This is expected to cost the government a whopping MYR40 billion (or 8.7 per cent of the budget). The fuel subsidies will certainly help to moderate the impact of high oil prices following the conflicts in the Middle East; inflation has been trending slightly upward since the beginning of 2026. Though inflation is not the sole factor determining electoral outcomes, the fuel subsidy would work in favour of PH.

The government has also introduced a swathe of measures to increase the disposable income of voters across the entire spectrum of income distribution. For voters at the lower income range, the allocation for cash transfers (Sumbangan Tunai Rahmah, STR) and credit transfer for purchasing basic goods (Sumbangan Asas Rahmah, SARA) will be increased from MYR15 billion to MYR16 billion in 2027 (or 3.5 per cent of the budget allocation). Both programmes will benefit a total of nine million individuals, or around 41 per cent of the estimated 22 million Malaysians aged 18 years old and above in 2026.

Two other budget initiatives will benefit low-income voters. The first is the increase in minimum wage from MYR1,700 to MYR2,000, which will take effect from June 2027 and affect four million workers/voters. The second initiative will see an increase in the minimum income rate for 600,000 ride and parcel hailing workers.

Voters with lower incomes are likely to welcome these programmes, but their impact on elections is uncertain. Statistical analysis of the previous general election (GE15) shows that political support for the Islamist party Parti Se-Islam Malaysia (PAS), currently the largest opposition party in Peninsular Malaysia, is strongly entrenched in constituencies with lower average incomes. In other words, voters in these constituencies will welcome these programmes but are likely to continue to support PAS.

Whether the Budget initiatives discussed earlier will boost Pakatan Harapan’s performance in the next general election will also depend on the timing of GE16.

In the previous GE, the two key parties in Anwar’s PH coalition — Parti Keadilan Rakyat (PKR) and the Democratic Action Party (DAP) — secured seats mainly in constituencies with higher median incomes (Figure 1) and more densely populated urban areas. This could explain Budget 2027’s initiatives for middle-income voters. These include the SARA Madani Assistance programme, which will provide a cash transfer of MYR100 twice in 2027 for 13 million adults who are not recipients of the STR. Some of the beneficiaries are middle-income voters. This new programme will cost the government around MYR2.6 billion.

Figure 1. Median Household Income, Parliamentary Constituencies in Peninsular Malaysia By GE15 Winning Party

In Budget 2027, the individual tax relief threshold will be increased from MYR9,000 to MYR12,000. In addition, the individual income tax rates for residents and SMEs will be reduced by one percentage point. These moves will benefit middle-income voters. Other initiatives that will benefit middle-income voters include a new medical insurance plan (MediAsas) that will make private healthcare more affordable (including subsidised premiums for smaller small and medium-sized enterprises, SMEs), and the deferment and relaxation of student loan (PTPTN) repayments.

Finally, the Bumiputera community is a key political constituency in Peninsular Malaysia. In GE15, PKR’s rivals, especially PAS and Parti Pribumi Bersatu Malaysia (Bersatu), did well in constituencies with a high proportion of Bumiputera voters (Figure 2). One possible reading of the initiatives that are targeted at the Bumiputera community is that the use of local projects enables PH to compete with PAS and Bersatu. Such initiatives include the projected increase in government procurement allocated to Bumiputera contractors from MYR4 billion in 2026 to MYR7.5 billion in 2027. In addition, the procurement threshold for maintenance, repair and upgrading work on government facilities will be raised from MYR50,000 to MYR200,000 for direct awards (no bidding) and from MYR500,000 to MYR3 million for quotations.  These changes in government procurement policies are likely to help PH bolster its resources to gain greater support from the Bumiputera community in GE16.

Figure 2. Bumiputera Share of Population, Parliamentary Constituencies in Peninsular Malaysia By GE15 Winning Party

The Budget also contains initiatives that aim to strengthen support for PKR’s urban Bumiputera voter base by addressing a key concern: affordable urban housing. These initiatives include the allocation of a 50-acre plot of land (valued at MYR1 billion) and an 11-acre plot (in Belfield for at least 2,500 units of Rumah MADANI, now known as Residensi MADANI; 70 per cent would be reserved for Bumiputera buyers), both in Kuala Lumpur, for this purpose.

Whether the Budget initiatives discussed earlier will boost Pakatan Harapan’s performance in the next general election will also depend on the timing of GE16. The fuel subsidies have immediate and lingering effects on voters, but the impact of income support and income tax cuts will be felt only towards the latter half of 2027. The momentum of government procurement projects is likely to build up and accelerate starting in early 2027, but effects from the urban housing projects for Bumiputera will be felt only beyond 2027. The trajectory of these developments would suggest that the Budget’s effects on PH’s political fortunes will be maximised if GE16 is held in the second half of 2027.

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