by Dr Rahim Said
For far too long, Malaysia has earned a reputation as a nation that spends beyond its means and borrows as though future generations are nothing more than credit card co-signers.
Successive governments have tried — and failed — to rein in fiscal indiscipline. Populist measures, blanket subsidies, and politically expedient giveaways have chipped away at national reserves while doing little to solve structural imbalances.
So when news emerged this week that the Madani government’s fiscal consolidation efforts are finally showing tangible results, even seasoned sceptics like me had to admit — someone in Putrajaya appears to be doing something right for a change.
Bank Muamalat’s chief economist, Dr Mohd Afzanizam Abdul Rashid, delivered what was arguably the most responsible piece of economic news we’ve heard in years.
Malaysia’s fiscal deficit has narrowed to 4.5% of GDP, down from 5.7% previously. The government’s foreign reserves climbed to a healthy US$119.9 billion from US$115.5 billion in the first half of 2025, and foreign ownership of Malaysian Government Securities jumped to 35.6% in May from 32% in January.
In plain terms: international investors are starting to regain confidence in Malaysia’s financial stewardship. And rightly so.
What makes this turnaround noteworthy is not just the numbers themselves, but the approach behind them. Rather than slashing spending indiscriminately or piling on new debt, the government appears to be tightening its belt while redirecting resources where they matter most.
The Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (Sara) programmes, which provide direct cash assistance to lower-income households, have seen their allocations rise to a record RM13 billion this year — up from RM10 billion last year. More importantly, the number of recipients has expanded from 700,000 to a remarkable 5.4 million.
This marks a decisive shift away from the outdated practice of broad-based subsidies, which historically benefitted both the needy and the well-heeled equally.
By better targeting fiscal assistance, the government not only stretches its limited resources further but also ensures that those who genuinely need help get it.
Of course, this isn’t a declaration of victory. Malaysia still grapples with high public debt, bloated bureaucracies, and fiscal leakages that could make a colander jealous.
But to be fair, this administration inherited a fiscal landscape riddled with landmines from years of political instability and pandemic-era emergency spending. That it has managed to reverse some of the damage without plunging the economy into recession deserves recognition.
Credit, too, must go to policymakers within the Ministry of Finance and Bank Negara Malaysia who have quietly, steadily, and perhaps thanklessly steered the ship towards calmer waters. It isn’t glamorous work. Fiscal consolidation rarely makes headlines like populist handouts or mega-project announcements do.
But in the long run, it’s this kind of disciplined housekeeping that determines whether a country stands on its own feet or stumbles from one financial crisis to another.
The improved numbers could soon translate into something more concrete: a potential sovereign credit rating upgrade. Currently holding respectable, if cautious, grades of A3 (Moody’s), A- (S&P Global) and BBB+ (Fitch), Malaysia’s standing in the eyes of global credit markets is poised for review.
Should the government stay the course — resisting the temptation to open the fiscal floodgates in the run-up to the next election — we may finally see those coveted positive rating actions.
It’s been a long time coming. And while the rakyat’s daily struggles with inflation, cost of living, and sluggish wage growth won’t be resolved overnight, responsible fiscal management is the necessary foundation upon which real, sustainable improvements are built.
To those behind this quietly unfolding fiscal renaissance: you have our applause. Now, just don’t blow it.
WE