Budget 2026: Tightrope Between Aid And Fiscal Restraint
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As Budget 2026, under the “Madani Budget” framework, approaches its tabling, expectations are running high across Malaysia, especially among the B40 (bottom 40% income) and M40 (middle 40%) households. The government has, in its Pre-Budget Statement 2026, has emphasised a continued commitment to social assistance and targeted subsidies, while aiming to contain fiscal deficits and rationalise blanket subsidies.
But can the next budget deliver new safety nets tailored for both B40 and M40 groups or will the usual support programmes simply be scaled up?
The case for new measures
In recent years, the M40 group has felt squeezed between subsidy cuts at one end and dwindling wage growth on the other. Experts expect Budget 2026 to offer some relief for M40 households via tax reliefs, housing support or childcare incentives, while maintaining strong support for B40. One proposal floated in policy circles is a “festival aid” or annual cash top-up for all B40 and M40 workers equivalent to one month’s salary, intended to cushion festive expense spikes.
Malaysia has gradually moved from blanket fuel subsidies to a more targeted model. For 2026, one of the anticipated “safety nets Malaysia” changes is extending targeted RON95 petrol subsidies using the PADU socioeconomic database. This would help ensure that lower- and middle-income earners continue to benefit, while higher-income users are excluded. Such targeting avoids welfare leakage and preserves fiscal space. Analysts expect portions of blanket subsidies to be trimmed further.
Furthermore, housing remains a major pressure point for both B40 and M40. Developers and property stakeholders hope the 2026 Budget will reintroduce targeted perks—stamp duty waivers, interest subsidies or expanded access to rent-to-own (RTO) schemes for lower- and middle-income groups. For instance, extending full stamp duty exemption for homes priced up to RM 500,000 or partial waiver for homes up to RM 700,000, may provide meaningful breathing room.
What holds the government back?
Despite optimism, the government is under pressure to maintain fiscal discipline. Analysts expect a slight increase in 2026 expenditure (to ~RM 430 billion) while narrowing the fiscal deficit to around 3.4–3.6 % of GDP. Moreover, the government’s earnings from Petronas are forecast to fall (as oil prices soften), reducing its dividend income. That constrained space may limit bold new programmes exclusively for M40; instead, some measures may be folded into broader subsidies.
Malaysia’s social support landscape is already fragmented across programmes like JKM, SARA, MyKasih and other bantuan schemes. Overlaps, inefficiencies and exclusion errors are frequent. The 13th Malaysia Plan emphasises a unified social protection registry to reduce duplication and improve targeting. Hence, any new safety net must navigate administrative complexity and inclusion risks.
A truly effective safety nets Malaysia package would combine immediate relief (cash, fuel, housing) with capacity building (skills, childcare) to enable upward mobility — especially for M40 households slipping toward B40 thresholds.
What could a balanced safety net look like?
The following hypothetical table illustrates possible support measures for B40 and M40 households based on current policy discussions and expert commentary.
| Support type | B40 target | M40 target | Notes / risks |
|---|---|---|---|
| Cash aid / festival top-ups | ✔ | ✔ | Must be means-tested to avoid fiscal drag |
| Targeted fuel (RON95) subsidy | ✔ | ✔ | Via PADU – ensures only eligible groups benefit |
| Tax relief / rebates | — | ✔ | E.g. child/education reliefs, deductible expenses |
| Housing assistance (stamp duty, interest subsidy) | ✔ | ✔ | May need caps so top-end M40 not overbenefited |
| Childcare / early education | ✔ | ✔ | Helps dual-income households, especially M40 |
| Skills / upskilling grants | ✔ | ✔ | Increases resilience, especially for M40 |
A truly effective safety nets Malaysia package would combine immediate relief (cash, fuel, housing) with capacity building (skills, childcare) to enable upward mobility — especially for M40 households slipping toward B40 thresholds.
Likely outcomes and key watchpoints
- Scaling, not new launches: It is more probable Budget 2026 will scale existing programmes (e.g. Bantuan Keluarga Malaysia, BR1M legacy, Rahmah) rather than introduce radically new ones.
- More nuanced targeting: Expect sharper income thresholds and better use of the PADU database for means testing.
- Greater support for M40: While the B40 remains central, measures for M40 (e.g. tax relief, housing support) are likely to see modest expansion.
- Conditionality & oversight: New programmes may come with conditions (e.g. training participation, children schooling) to optimise cost-effectiveness.
- Digital/inclusive design: To avoid excluding vulnerable groups (especially rural or digitally marginalised), offline support and registries will still be needed.
Some FAQs on every Malaysians minds right now
Q: Will Budget 2026 eliminate all subsidies for the rich and maintain full support for B40?
A: The government has signalled further subsidy rationalisation, especially for high-income households, but complete elimination is unlikely. Most changes are likely to involve targeted cuts and eligibility refinements.
Q: How can M40 households prove eligibility if new aid is means-tested?
A: The PADU database will play a central role. Households should ensure their socioeconomic data is up to date (e.g. income, employment, household size).
Q: For housing aid, will first-time homebuyers from M40 be eligible?
A: That is a strong possibility. Support via stamp duty waivers, interest subsidies or enabling matching grants is anticipated, though with caps and restrictions to maintain fairness.
In a nutshell
Budget 2026 faces a delicate balancing act: delivering new or improved safety nets Malaysia needs without jeopardising fiscal prudence. For the B40, modest expansions of cash, fuel and housing relief remain realistic. For the M40, the expectation is for more targeted tax reliefs and support services, rather than blanket subsidies.
Whether the new safety nets truly make a difference will depend less on headline amounts and more on precision, delivery and avoiding exclusion errors. Malaysians will watch closely how the ledger adds up as the burden on middle and lower strata grows heavier.
