Budget 2025 balances economic advancement, the wellbeing of the rakyat and fiscal reforms

## Media Release

**18 October 2024, Kuala Lumpur**—Budget 2025 balances advancing Malaysia’s economy and protecting the wellbeing of the rakyat, supported by a commitment to fiscal reforms and inclusive growth.

### Fiscal reforms support a more efficient government revenue stream

The focus on both subsidy rationalisation and broadening of the tax base reflects sound fiscal prudence, bolstering the country’s resilience amid increasing global uncertainty. KRI lauds the government’s resolve to embark on the RON95 rationalisation, with the resulting savings directed towards strengthening key sectors, including health, education, and social welfare.

The proposed introduction of a carbon tax on energy in 2026 is potentially more effective than carbon markets. However, its impact on cost of living and industry competitiveness will depend largely on the level of taxation implemented.

### Raising the ceiling through strengthening innovation and human capital

Budget 2025 sees a major mobilisation of domestic investment via GEAR-uP led by Government-Linked Investment Companies (GLICs) to support Malaysia’s industrial ambitions.

We note the continued focus on training initiatives, particularly the emphasis on TVET, which has expanded to various critical sectors such as semiconductors, robotics, and AI. Targeting the urban poor, rural communities, and indigenous youth will prepare our most vulnerable to thrive in an ever-evolving economy.

We commend the increased minimum wage threshold and the establishment of a wage guide for all sectors. Together with greater investments within the business ecosystems, these initiatives mark a decisive step towards raising the ceiling for both individuals and businesses, ensuring sustainable and equitable progress for Malaysia.

The government’s drive in championing AI adoption and governance is also acknowledged, including the establishment of the new National AI Office and ASEAN AI Safety Network, among other initiatives on digital transformation. The Budget’s emphasis on online safety and cybersecurity could be complemented by further strengthening data governance.

### Economic advancement without neglecting societal wellbeing

The expansion of Sumbangan Tunai Rahmah (STR) to RM13 billion, along with other targeted assistance, is well-positioned to help the rakyat manage the impact of subsidy rationalisation. The continuous effort to enhance social protection for the self-employed, housewives and the elderly through increased government contributions to PERKESO and EPF promises to safeguard their wellbeing.

The efforts to improve public health are also welcome, especially upgrading public healthcare infrastructure; reforming procurement and care delivery processes; and promoting healthier choices through increasing the excise duty on sugary drinks.

Overall, KRI sees Budget 2025 as a step forward for Malaysia’s development, striking a crucial balance between raising the country’s global economic standing and uplifting the wellbeing of the rakyat.

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For further information, please contact Najyah Johar Salim ( [najyah.johar@krinstitute.org](mailto:najyah.johar@krinstitute.org)) or call 03-2705 6103.