The Malaysian Ministry of Finance (MOF) has proposed a reduction in operating expenditure (OE) of RM5.4 billion involving the health and higher education sectors as a measure to strengthen the country's fiscal position.
The proposal comes as the government is reassessing spending in the wake of mounting financial pressures.
The review comes amid an expected surge in subsidy costs, putting significant pressure on government finances. Despite the cuts in operating expenditure, the government has assured that basic and critical services will not be affected.
This move is part of a broader strategy to achieve savings of around RM10 billion across all government ministries and agencies by Budget 2026.
The main focus is to ensure fiscal sustainability in an uncertain global economic environment.
Fiscal pressure is also being influenced by external factors including the conflict in the Middle East that is disrupting key trade routes such as the Strait of Hormuz. This disruption is impacting global oil prices, further increasing logistics, energy and living costs.
Subsidy requirements are expected to increase to RM58.4 billion from RM43.4 billion previously, far exceeding the original allocation of RM15 billion.
In the austerity drive, the health and higher education sectors recorded the largest reductions, around RM3.06 billion and RM2.39 billion respectively, while the National Budget Office has been tasked with realigning spending for 2026.
