Malaysia’s Anwar set to unveil crowd-pleasing budget as political pressure rises

Malaysia’s Anwar Ibrahim is expected to roll out a populist budget on Friday aimed at placating voter concerns over the cost of living and access to essential services, experts say, as the prime minister seeks to shore up support ahead of a general election that could be called as soon as next year.

Anwar’s coalition government is under mounting pressure amid a deepening feud with Umno. The Malay nationalist party, a key partner in Anwar’s administration, has demanded a snap poll after defeating the ruling Pakatan Harapan (PH) coalition in recent state elections.

The political fallout could force Anwar to call for a national election ahead of the February 2028 deadline – especially if PH fails to secure a strong result in the coming Melaka state poll.

Anwar is expected to present an expansionary budget for 2027, with experts predicting higher cash handouts and targeted subsidies, increased spending on education and healthcare and measures to support higher wages and skills training for lower-income Malaysians.

The measures could include higher monthly cash aid for household necessities, special financial help for civil servants and pensioners, expanded government-backed pension and insurance for gig workers, and possible adjustments to electricity pricing to cushion the impact of rising costs, according to a research note by Singapore banking giant UOB.

“Anwar is likely to use Budget 2027 to rebuild political confidence around cost-of-living issues and address the government’s weak support among Malay voters,” said Asrul Sani, associate vice-president with strategic advisory and business consulting firm The Asia Group.

The prime minister has struggled to build support among the Malay-Muslim majority, which accounts for roughly 60 per cent of Malaysia’s 34 million population, leaving him heavily reliant on Umno.

That partnership has come under strain after Umno scored convincing victories over PH in back-to-back state elections in Johor and Negeri Sembilan, forcing Anwar to recalibrate his political strategy.

Early start

Anwar had already sought to get ahead of Friday’s budget with a slew of policy measures announced over the past month to ease cost pressures on households.

Monthly subsidised petrol quotas were restored to 300 litres (80 gallons) per person from September 1 after an earlier cut in response to the energy crisis triggered by the Iran war. Pickup truck drivers were given a higher monthly quota of 400 litres of diesel.

On August 30, he announced a 50 per cent hike in funding for school maintenance, raising the total allocation to 1.5 billion ringgit (US$367 million) to cover all school categories over the whole of 2027.

Anwar also posted on September 24 that micro-businesses and small and medium enterprises – which account for over 90 per cent of registered businesses in Malaysia and are the largest source of employment – would be granted access to 6 billion ringgit in financing and limited exemptions to tax requirements.

But with much of its bandwidth taken up by soaring fuel subsidies, the government has little fiscal space to add more goodies to its budget bag.

It had already spent 38 billion ringgit on fuel subsidies over the first half of 2026, about 61 per cent higher than initially budgeted, said Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat.

“Given that global crude oil prices are likely to stay elevated, the government is expected to provide a higher allocation for the fuel subsidies for 2027,” he said.

“At the same time, the government would need to maintain a narrower fiscal deficit going forward in order to contain the government debt ratio to 60 per cent at some point. So the government has less fiscal headroom.”

Anwar will also need to stave off pressure from Umno to include measures that could bolster its political position at his expense, while at the same time presenting a budget that can pacify long-time supporters angered by his administration’s perceived failure to deliver on promised reforms.

Friday’s budget will be “politically critical” for Anwar, as it gives him a chance to reset the political narrative and show that his government is responsive to voter concerns, according to Asrul.

“Anwar’s challenge is to give voters enough to feel the government is responding, without weakening the country’s fiscal credibility,” Asrul said.