By DayakDaily Team
KUCHING, Dec 4: Malaysia’s federal government debt now stands at RM1.247 trillion in 2024, with new borrowing in 2026 projected at RM74.8 billion, and at the current pace of deficit reduction, the country could take a decade or more to achieve a balanced budget, Senator Robert Lau warned in the Dewan Negara today during the debate on the Supply Bill 2026.
Delivering his speech, Lau acknowledged that the Supply Bill 2026, the first budget under the 13th Malaysia Plan and the fourth presented by the Madani Government under the theme “Belanjawan Rakyat”, delivered higher revenue, primarily from the Sales and Services Tax (SST), along with a smaller fiscal deficit and slower absolute debt growth, while the long-awaited RON95 subsidy rationalisation has begun, generating savings by plugging leakages to foreign entities.
Malaysia’s economy grew 4.4 per cent in the first half of 2025, with full-year growth expected between 4.0 per cent and 4.8 per cent, and GDP growth for 2026 projected at 4.0–4.5 per cent, Lau noted.
The fiscal deficit has been reduced for five consecutive years, from 5.6 per cent in 2022 to a forecasted 3.5 per cent in 2026, yet he cautioned that fiscal deficit remains the nation’s greatest long-term vulnerability, forcing continued borrowing and weakening resilience.
He also highlighted that the government has yet to provide a target year for achieving a balanced budget, meaning national debt will continue to rise in the interim.
“Our debt-servicing ratio has climbed to 16.3 per cent (RM58.3 billion), nearly matching total SST collection of RM58.6 billion. This is up from 14 per cent in 2022, and will likely continue rising unless revenue grows faster than expenditure,” he said.
He welcomed government initiatives such as the Public Finance and Fiscal Responsibility Act 2023 and the Government Procurement Act, which aim to strengthen fiscal discipline, transparency, and accountability.
“Federal revenue in 2024 reached RM324.6 billion, higher than the initial projection of RM307 billion. Tax revenues continue to increase, including from the higher top marginal personal income tax rate of 28 per cent,” he said.
However, he urged caution, noting that overtaxing high-income earners, who are key drivers of investment and job creation, could harm Malaysia’s competitiveness.
He also called attention to untapped investment-based income, observing that wage earners often pay higher taxes than investors whose income is mostly passive.
“Gains from investments are a major source of wealth, but are mostly untaxed except for dividend and real property gain tax. As is often pointed out, wage earners who perform ‘real work’ pay higher taxes than investors whose income comes passively,” he said.
The Senator also highlighted Malaysia’s continued reliance on petroleum resources, which account for nearly 20 per cent of federal revenue, including dividends from Petroliam Nasional Berhad (PETRONAS), petroleum income tax, export duties, royalties, and levies on crude oil and LNG exports.
“In 2024, Petronas contributed a dividend of RM32 billion, down from RM40 billion in 2023, while petroleum income tax is at RM20.5 billion, compared with RM26.1 billion the previous year. Additionally, the government collected RM12 billion from the levy on crude oil and LNG exports, and RM1 billion from the export duty on crude petroleum,” he said.
He contrasted this with the palm oil industry, which contributes around RM11.5 billion annually and is earned through labour and enterprise rather than extraction, but warned of slow replanting and mechanisation challenges.
Lau questioned whether the heavy taxation on the industry is being reinvested to ensure long-term sustainability.
“It has been said this industry is the most heavily taxed, attracting seven types of taxes. The question is: How much of the tax collected is reinvested into ensuring the industry’s long-term sustainability?” he asked.
He also raised concerns over Malaysia’s geopolitical and trade vulnerabilities, particularly regarding the Agreement on Reciprocal Trade (ART) with the United States, which could constrain Malaysia’s trade sovereignty and complicate relations with other major partners like China.
“Malaysia stands at a crucial juncture. Our fiscal constraints, geopolitical vulnerabilities, and structural weaknesses require serious and sustained reform. We must strengthen accountability, modernise our economy, invest wisely, and negotiate confidently. Only then can we build a resilient and dignified Malaysia for all,” he concluded while expressing support for the Supply Bill 2026. — DayakDaily
