Malaysia’s austerity cuts risk slowing growth, hurting public services, says Lim Guan Eng

“KUALA LUMPUR, April 30 — Lim Guan Eng today warned that proposed austerity measures under Budget 2026 could weaken Malaysia’s economic growth and undermine the delivery of essential public services. In a statement, the Bagan MP said planned spending cuts — reportedly amounting to RM10 billion from the approved RM229 billion operating expenditure — may dampen gross domestic product (GDP) growth, which Bank Negara Malaysia has projected at between 4 and 5 per cent this year. He said reductions affecting key sectors such as healthcare, education, security and infrastructure risk compromising services that should not be curtailed. Among the reported cuts, RM3.06 billion could be trimmed from the Health Ministry’s RM46.5 billion allocation, while the Higher Education Ministry may see RM2.39 billion reduced from its RM18.6 billion budget. Other ministries facing potential reductions include the Treasury (RM664 million), Home Ministry (RM647 million), Defence Ministry (RM508 million), Rural and Regional Development Ministry (RM571 million), Education Ministry (RM466 million), and the Digital Ministry (RM508 million). Lim said while the public may accept short-term measures such as freezing new civil service hires and postponing non-essential events, deeper cuts that affect public services would be unacceptable. He added that the government’s fiscal strain — driven by a surge in subsidies estimated to reach RM58.4 billion this year, up from the initial RM15 billion allocation — should instead be addressed through alternative financing. “The RM43.4 billion shortfall cannot be resolved through a mere RM10 billion cut in operating expenditure,” he said. Lim suggested that emergency loan measures could be used to bridge the gap, noting that such financing would require parliamentary approval. He also said there was no need to retable Budget 2026 in full, proposing instead that the government introduce a supplementary budget to reflect revised fiscal estimates. At the same time, Lim cautioned that austerity-driven cuts could worsen a slowdown in private investment and economic activity, with micro, small and medium enterprises (MSMEs) particularly vulnerable. He urged the government to strengthen support measures, including ensuring that Bank Negara Malaysia’s RM5 billion SME Stabilisation Relief Facility includes an interest-free, collateral-free component for the first RM50,000 of loans. He also called for a one-year moratorium on interest payments for existing loans to ease financial pressure on businesses.

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