Govt plans to reform development expenditure allocation based on states’ needs, says Economy Ministry

The Economy Ministry said the main focus was to trim the productivity gap between less-developed states and the national average. — Picture by Raymond Manuel

First Published: Friday, 30 Oct 2026 9:23 AM MYT

KUALA LUMPUR, Oct 30 — The government plans to reform federal development expenditure by moving away from a historical spending-based approach towards a model that prioritises equity and efficiency to narrow regional productivity gaps.

The Economy Ministry said the main focus was to trim the productivity gap between less-developed states and the national average.

“Annual increases in allocations under Budget 2027 do not necessarily mean that states receiving smaller allocations are underperforming compared with more developed states.

“Instead, these states may be more capable of diversifying their local economies by leveraging existing resources,” the ministry stated in a reply to the Dewan Rakyat today.

The ministry was responding to Datuk Seri Dr Ahmad Samsuri Mokhtar (PN-Kemaman) on targets to narrow regional productivity gaps and mechanisms for allocating development funds based on the needs of states and their people.

The Economy Ministry said structural economic imbalances between states posed a threat to national competitiveness.

“If left unaddressed, regions lagging in production capacity will continue to widen the country’s productivity gap.

“Therefore, federal development allocations must serve as a key fiscal stimulus to address infrastructure deficits, technology gaps and labour market weaknesses in less-developed states, towards sustainable regional economic convergence,” it said. — Bernama