Safe vs bold reforms: Economists size up Putrajaya's Budget 2027 against Bersama's alternative

BUDGET 2027 | Economists have opined that while Putrajaya’s Budget 2027 plays it safe with targeted aid and gradual consolidation, Bersama’s alternative budget bets on a goods and services tax (GST) as well as subsidy reform, albeit with certain risks.

While the analysts contacted by Malaysiakini agreed that Bersama’s shadow budget, presented by party co-leader Rafizi Ramli on Oct 7, tackles structural weaknesses the government’s plan leaves untouched, they differed on how much credit Putrajaya’s cautious approach deserves.

Putra Business School associate professor Ahmed Razman Abdul Latiff noted that the government’s gradual fiscal consolidation under its RM459.8 billion Budget 2027 gives households greater short-term certainty and protection, backed by targeted assistance, tax relief, and higher wages.

He cautioned, however, that the preference detailed in the federal expenditure tabled by Prime Minister Anwar Ibrahim on Oct 9 risks delaying necessary reforms to broaden the nation’s revenue base and reduce long-term fiscal pressures.

In contrast, Ahmed Razman (below) said Bersama’s shadow budget advocates more fundamental reforms, including introducing GST, restructuring fuel subsidies, and strengthening fiscal discipline.

While such proposals from the party offer a “useful alternative” for addressing structural weaknesses, the economic analyst warned that bringing back GST and abolishing subsidies could heighten cost-of-living concerns unless adequate compensation is provided to vulnerable groups.

What each budget does

Bersama’s alternative budget mooted the replacement of the sales and service tax (SST) with the GST at a five percent rate for a period of 10 years.

It also proposed scrapping the Budi95 fuel subsidy, Rahmah Cash Aid (STR), and Rahmah Necessities Aid (Sara), with subsequent savings instead to be used to fund a monthly cost-of-living allowance, fuel allowance, child allowance, and social pension.

READ MORE: ICYMI | Bersama's Budget 2027: Not 'business as usual', and what it would do instead

Putrajaya, however, is going the other way. Budget 2027, the largest the federal government has tabled to date, sets aside more than RM80 billion for subsidies, aid, and incentives - up from the RM49 billion allocation in Budget 2026.

On the fiscal numbers, Anwar said in his budget speech in the Dewan Rakyat that the deficit is projected at 3.6 percent this year, against an original target of 3.5 percent, before falling to 3.3 percent in 2027 and three percent by 2028.

Debt is estimated to fall to 63.7 percent of the nation’s gross domestic product (GDP) next year, with revenue rising to RM380.8 billion.

READ MORE: Eight takeaways from Budget 2027

Meanwhile, Bersama projected that its package would lift revenue to RM392 billion in 2027, bring the deficit down to three percent of GDP (RM70.3 billion), and cut debt to 63.6 percent.

By 2031, the deficit under Bersama’s game plan would fall to 1.8 percent, with the party projecting that its package would put the federal budget on course for its first surplus since 1997 by 2035.

While the 2027 headline targets set in both budgets do not differ significantly, the gap appears to lie in how each plans to get there.

‘A whole new approach’

Geoffrey Williams, the founder and director of Williams Business Consultancy, was more emphatic in favouring Bersama’s shadow budget, describing its package as a “whole new approach” that utilises sound fiscal management to free up income for social policy.

Referencing Bersama’s 2035 surplus target, he lamented that the government seems to be merely attempting not to breach its debt and deficit targets - a feat he said is achievable as GDP grows faster than debt, so the ratio falls even as debt keeps rising.

Williams (below) noted that Anwar did not mention GST in his budget speech, which the economist attributed to the prime minister’s opposition to the tax and earlier reports on potential adjustments to the SST.

The prime minister, he further argued, raised thresholds and cut rates, but failed to make any “real reforms”.

READ MORE: Tax breaks for M40, higher levy for millionaires

“(While) Anwar sticks to STR-Sara handouts with no real reforms to help middle-income groups, Bersama has universal child assistance, universal pensions, and universal monthly cost-of-living aid to raise incomes, irrespective of ethnicity or interest groups.

“(Bersama’s shadow budget) concentrates social support into one ministry and provides focus (across) 189 separate agencies,” he added.

He also highlighted that while the government’s budget “sticks to old schemes” focused on low petrol and diesel prices, Bersama appears more intent on stopping “wasteful subsidies” and providing targeted assistance instead of “keeping prices down artificially.”

“(Bersama’s) reforms are universal, refreshing, new, and not like anything we have seen before.

“Anwar’s budget was administrative with normal handouts to specific interest groups, but no sense of universal vision or reform for everyone. It was very similar to any budget of the past,” he asserted.

In his budget speech, Anwar framed the budget not merely as a matter of calculating revenue and allocating funds, but as a “test” of trust placed in the government to keep power in check, uphold laws and manage public funds with integrity.

‘Targeted approach’

Tax experts quoted by Bernama, however, viewed the absence of new taxes as part of a targeted approach.

Deloitte Malaysia Tax Leader Sim Kwang Gek said the government’s budget focuses on strengthening the country’s economic foundations and positioning Malaysia for future growth without introducing new tax reforms or taxes.

On middle-income households, Deloitte Malaysia Global Employer Services leader Ang Weina said the budget aims to strengthen their financial resilience through tax reductions, expanded relief measures, and housing-related incentives.

She also highlighted a particular emphasis on the “sandwich generation”, with enhanced reliefs to ease the burden of caring for dependent children and ageing parents.

According to Chartered Tax Institute of Malaysia president Alan Chung, the tax savings measures for micro, small, and medium enterprises (MSMEs) would help them maintain financial resilience amid inflation and higher energy prices following recent global geopolitical tensions.

He noted that the extension of the relief period would ease cash flow pressures arising from capital investments and encourage domestic investment while continuing to support local businesses.

Similarly, Deloitte Malaysia country managing partner Yee Wing Peng said the push to cut the deficit to 3.3 percent of GDP, while continuing to invest in artificial intelligence, digitalisation, education, talent development, and strategic infrastructure, reflects a commitment to balancing fiscal sustainability with growth.

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