As Malaysia moves forward in strengthening its economy and uplifting the well-being of its people, Budget 2026 sets a clear direction for inclusive, sustainable, and balanced national development.

Fiscal discipline and economic management

The Malaysian government has proposed a record allocation of RM470 billion for Budget 2026. The fiscal deficit is projected to decrease to 3.8%, with a target of 3.5% by 2026, continuing a three-year trend of deficit reduction.

Major infrastructure push in Sabah and Sarawak

To enhance regional connectivity, several high-impact infrastructure projects are underway:

• Sarawak–Sabah Link Road (SSLR):
  • Phase 1: Completion by November 2026
  • Phase 2: Under construction, expected by mid-2029
• Trans Borneo Highway (LTB):
  • Will complete road links between Sabah and Sarawak
  • Tenders (SST) to be issued in Q1 2026
• Durin–Salim Red Line Upgrade in Sibu, Sarawak:
  • RM350 million allocated for road structure enhancement
• Total value of infrastructure projects: RM48 billion

Tourism recovery and domestic travel support

To revitalize the tourism sector, the government has allocated RM700 million with the goal of attracting 47 million visitors and generating RM329 billion in tourism revenue.

• Personal income tax relief up to RM1,000 for:
  • Entry fees to local tourist attractions
  • Participation in cultural programmes

This aims to encourage more Malaysians to travel within the country, as many currently choose to travel abroad.

Incentives for taxi and e-hailing drivers

• The government will continue 100% excise and sales tax exemptions for the purchase of new national cars (PROTON and PERODUA) by:
  • Registered taxi drivers
  • Private hire car owners

This initiative supports the Visit Malaysia 2026 campaign.

AI as a national priority

Artificial intelligence (AI) takes centre stage in Budget 2026, with a focus on positioning Malaysia as a regional leader in digital innovation.

Key initiatives include:

• Strengthening the National Artificial Intelligence Office (NAIO)
• Expanding the country’s first AI Faculty at Universiti Teknologi Malaysia (UTM)
• Advancing AI in critical sectors:
  • Semiconductors (USM)
  • Medicine (UM)
  • Cryptology (UPM)
  • Broader applications (MMU)

Malaysia has also launched ILMU, the first Bahasa Malaysia AI language model, developed by Universiti Malaya and YTL AI Labs.

Major investments secured:

• Microsoft: USD 2.2 billion for the West Malaysia Cloud Region, training 800,000 Malaysians, and establishing a National AI Innovation Centre
• Google: USD 2 billion for a data centre and Cloud Region in Selangor, plus AI training for public servants via AI@Work 2.0
• AWS: Supporting SME digitalisation through machine learning and big data tools

Expanded childcare tax relief

The existing RM3,000 individual income tax relief for children’s fees at registered childcare centres and kindergartens (up to 6 years old) will be expanded to include children up to 12 years old at registered day care and transit centres, effective assessment year 2026.

Support for low-income youth

To help youth from low-income families join the delivery and gig economy, the government will fully cover the cost of obtaining a B2 motorcycle license.

Improved accessibility for persons with disabilities (OKU)

• Prasarana will provide 100 special mobility vans to support OKU mobility.
• Each van can carry up to three wheelchair users and comes with a wheelchair lift system.

Hardcore Poverty Nearly Eradicated

For the first time in Malaysia’s history, the hardcore poverty rate has dropped from 0.2% to just 0.09%, benefiting approximately 7,000 households nationwide.

• This milestone reflects the effectiveness of targeted poverty eradication initiatives under the MADANI framework.

Second RM100 SARA aid for all adults

To help Malaysians prepare for major festive seasons, the government will provide a RM100 SARA cash assistance to 22 million citizens aged 18 and above.

• Disbursement will take place in mid-February 2026, ahead of Chinese New Year and Hari Raya Aidilfitri.
• This is the second round of such aid, aimed at easing cost-of-living pressures.

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