Written by YAM Tunku Panglima Besar, Tunku Zain Al-‘Abidin ibni Tuanku Muhriz, Founding President of the Institute for Democracy and Economic Affairs (IDEAS).

As usual, my colleagues at the Institute for Democracy and Economic Affairs (IDEAS) produced an analysis of what will be funded, what the public will be asked to pay for and what reforms are being promised in Budget 2027 – widely deemed by bankers, investors, diplomats and pundits as an ‘election budget’, since we know a general election has to happen by early 2028.

In summary, Budget 2027 offers some reasons for cautious optimism, maintaining the path towards fiscal consolidation while providing support for households, essential services and strategic industries.

Still, the more important question is whether Malaysia is addressing the structural weaknesses that will determine its economic future.

The projected reduction in the fiscal deficit, from 3.6% of GDP in 2026 to 3.3%t in 2027, is welcome. So too are allocations for dilapidated schools, assistance for senior citizens and disaster-affected households and measures to support semiconductor manufacturing, digitalisation and green investment.

All these are sensible responses to immediate needs. The real test, however, is whether public money generates lasting improvements in productivity, opportunity and the quality of life.

In this regard, more questions could have been answered better. Development expenditure is projected to rise by just 2.5%, compared with 3.8% for operating expenditure.

Meanwhile, the tax-to-GDP ratio remains unchanged at 12.8%, leaving the government dependent on petroleum-related income and a projected RM32bil dividend from PETRONAS.

At a time when principal oil-rich nations are diversifying their economies, we certainly cannot indefinitely rely on oil revenues to finance our ambitions. A ­broader revenue base, more transparent fiscal reporting and better-targeted subsidies are necessary if we are to reconcile fiscal discipline with sustained investment in the country’s future.

A similar tension emerges in economic and social policies. Support for strategic industries is welcome, but incentives must produce measurable gains in local skills, domestic supply chains and better-paying jobs.

Green investment deserves encouragement, yet businesses also need clarity on the carbon tax and the timetable for decarbonisation.

Additional funding for schools and healthcare matters, but so does ensuring that frontline services have the resources and personnel to deliver.

Higher allocations to Sabah and Sarawak are positive, but a predictable and equitable formula for federal transfers would provide a stronger foundation for long-term development.

Likewise, commitments to parliamentary autonomy and institutional reform must translate into concrete action on political financing, electoral reform, prosecutorial independence and limits on executive power: areas, of course, that Ideas focuses on separately.

Our analysis concludes: “Budget 2027 addresses immediate pressures but leaves key structural challenges unresolved. Ideas urges the government to broaden its revenue base, improve spending transparency, ensure investment incentives deliver measurable outcomes, strengthen essential services and expedite critical institutional reforms.

“Strengthening fiscal resilience, improving institutional accountability and investing in long-term economic and social capacity will be essential to translating Budget 2027’s ambitions into sustained progress.”

I am proud of my team when academics, economists and journalists come up to me at events and offer their congratulations to me on Ideas’ analysis. But it’s important to hear other voices too and at a lunch with a group of artists, photographers and dancers, there was one specific lament: “There’s not enough money for the arts! There never is enough money for the arts!”

Everyone welcomed the policy of a full exemption on entertainment duty for tickets to local films and theatre performances in the Federal Territories – though state governments need to follow suit.

But apart from that, there is disappointment with the amount of money allocated and frustration that simple policies adopted in neighbouring countries – such as Singapore’s culture pass in which citizens get a subsidy to enjoy performances and exhibitions – have not been emulated.

Such a voucher system alleviates some criticism that the government gets to specifically define what ‘culture’ is.

While large grants for museums and projects should still ­continue (albeit with transparency as to who receives what and why), the element of choice enables Malaysians themselves to reward content, encouraging the organic growth of local talent (alongside the instant fame of social media stars).

As I got more involved in the arts space myself – with more exposure to film and music production in addition to the long-standing patronages I have enjoyed in classical music education and percussion – I am constantly in awe of the talent that exists across our government and private-sector led arts organisations.

I commend the efforts in the Budget to strengthen the economic and institutional resilience of our country, but I hope we can find further space to uplift, inspire and forge our sense of personal and national identity through arts, in good times but especially in bad.

This article was featured in The Star, 16 October 2026

The views expressed in this article are solely those of the authors and do not necessarily represent the views or positions of IDEAS Malaysia. All opinions are the author’s own