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

 

Bersama’s shadow Budget 2027 has argued that “business as usual” is no longer an option for Malaysia’s fiscal policy amid global uncertainty and mounting structural pressures at home.

The proposed budget, presented by party co-leader Rafizi Ramli last night, said Malaysia can build resilience by strengthening domestic capacity, diversifying sources of growth, and taking the “hard road” on structural reform.

Rafizi argued that annual budgets have long functioned like a “fire extinguisher”, with problems tackled only after they emerge, when the fiscal cost of responding is higher and policy options narrower.

Bersama instead wants a longer-term approach to avoid late interventions and damage-control policymaking.

Among its key proposals, the shadow budget would replace the sales and service tax (SST) with a five percent goods and services tax (GST). It would also scrap the Budi95 fuel subsidy, Rahmah Cash Aid (STR), and Rahmah Necessities Aid (Sara), using the savings to fund a monthly cost-of-living allowance, fuel allowance, child allowance, and social pension.

It also proposed legally requiring the government to repay, rather than refinance, at least two percent of maturing debt each year. Together with its revenue and spending measures, Bersama projects public debt falling to 54.8 percent of gross domestic product (GDP) by 2031, compared with 61 percent if current policies continue.

Rafizi (above) framed the shadow budget as part of the party’s effort to shift public discourse away from political narratives and towards the nation’s underlying problems - matters the former economy minister described as “unsexy, complex, and supposedly unable to win votes”.

Ahead of Prime Minister Anwar Ibrahim’s tabling of the Madani administration’s federal budget tomorrow, Malaysiakini looks at what Bersama’s 153-page shadow budget says is wrong with the country and how it proposes to address it.

The diagnosis

The shadow budget starts from the argument that headline economic figures mask weak household finances. While GDP growth is 5.4 percent this year, gross national income (GNI) grew by only about two percent in the second quarter, it noted.

The median wage was RM3,027 in March, up just RM27, or 0.9 percent, in a year. Median pay for degree holders in 2025 also remained below pre-pandemic levels.

Half of all households spend close to 80 percent of their disposable income, while B40 households are left with around RM81 a month after spending 97.5 percent of their income, according to Statistics Department (DOSM) data cited in the document.

Only 4.2 percent of seniors receive elderly assistance, while resignations among permanent medical officers more than doubled from 238 in 2021 to 498 in 2025.

Malaysia’s Programme for International Student Assessment (Pisa) 2025 score was the lowest on record, while the auditor-general has counted 1,505 dilapidated schools awaiting repairs.

Bersama estimated that the government will meet its 3.5 percent deficit target this year, with debt at 64.9 percent of GDP, but at a cost. The Budi95 fuel subsidy bill is expected to rise by RM27.9 billion due to higher oil prices, partly offset by higher Petronas dividends and RM10 billion in spending cuts announced earlier this year.

Debt service charges accounted for 16 percent of federal revenue last year, exceeding the government’s own 15 percent benchmark and absorbing about 13 percent of total expenditure. The figure is projected to reach RM58.4 billion this year, up from RM54.3 billion.

Rafizi said that on its current trajectory, debt service charges could hit RM70 billion by 2030.

“Simply put, for every RM1 collected by the government, about 16 sen has already been allocated to pay past debt service before it can be spent on health, education, infrastructure, or social protection.

“A shrinking deficit does not automatically mean fiscal space is widening when existing debt stock continues to absorb a growing share of revenue. The goal of fiscal consolidation should be to restore space for productive spending, not merely to produce smaller deficit figures on paper,” the document stated.

The fixes

• Revenue

Bersama proposed holding its five percent GST rate for 10 years, with input tax credits refunded within 30 days. It argued that SST’s narrow base and lack of input credits result in cascading taxes and leakage.

The party estimates that GST would raise RM76.1 billion, or 3.3 percent of GDP, compared with RM59.4 billion from SST - a net gain of RM16.7 billion.

Under the shadow budget, five percent of GST collections, or about RM3.8 billion in 2027, would be channelled to state governments.

Speaking at a forum during yesterday’s event, party co-leader Nik Nazmi Nik Ahmad recalled that one of the major issues he faced as natural resources and environmental sustainability minister was widespread deforestation in areas under state governments.

“(State administrations) are squeezed - they will look for any form of revenue. When states do not have large commercial or industrial components… the easiest thing to do is cut down the forest, get the timber out, and plant palm oil.

“If we are able to say that under our GST (system), state governments can have a bit of (revenue), then that is one way to build a political and social contract,” said Nik Nazmi (below), who is the former Setiawangsa MP.

Bersama also proposed a 0.5 percent tax on retail electronic payments. The measure would be studied from 2027 to 2029, with no tax collected during that period, and introduced from 2030 only if deemed feasible.

• Replacing subsidies with cash

- Cost of living allowance: RM200 a month for every B60 household, costing about RM12 billion a year.

- Fuel allowance: For 80 percent of households, set at 90 percent of the unsubsidised-price gap for B40 households and 65 percent for M40 households, with the allowance decreasing when prices fall.

- Child allowance: RM50 a month for every citizen under 18, capped at RM250 per household, costing RM5.3 billion.

- Social pension: RM600 a month for seniors with no retirement income, tapering for those with pensions or Employees Provident Fund (EPF) income below RM1,600. The scheme would reach 3.1 million people at a cost of RM18.1 billion a year by 2028.

Eligibility for the allowances would be based on a household’s net disposable income rather than the government’s current definitions and classifications of income groups.

This would take into account not only taxes and statutory deductions, but also "reasonable" basic expenses, as well as family size, demographics, and even cost of living based on locality.

The shadow budget also proposes consolidating 189 government assistance programmes across 26 ministries and agencies under a new Social Security Ministry.

• Hardwiring debt repayment

Bersama also proposes amendments to the Loan (Local) Act 1959, the Government Funding Act 1983, and the Public Finance and Fiscal Responsibility Act 2023.

The amendments would require the government to repay at least two percent of maturing debt each year while barring refinancing. A dedicated trust fund would hold the money, preventing it from being diverted to ordinary spending.

The shadow budget also proposes an independent Public Finance Commission to assess budget assumptions and the long-term costs of major public-private partnerships, concessions, and guarantees before approval. Its mandate could potentially extend to costing parties’ election promises.

Crisis exemptions would require disclosure to Parliament and a timeline for returning to compliance. Bersama estimates that the measures would save about RM7 billion in cumulative debt service costs.

• Wages, workers and ageing

Bersama proposes a tiered migrant worker levy of RM500, RM1,500, or RM3,000 a year per worker. It would tie migrant worker quotas to the number of local workers employed by a firm and the wages paid to them, while reducing work permits to three years.

The party also proposes state-level minimum wages, with a national rate of RM1,800, as well as a long-term care insurance scheme.

The scheme would be funded by a one percent payroll contribution from age 40, split equally between employers and employees, and cover 90 percent of care costs up to monthly caps.

Where the money comes from, and who gains

- Bersama identified RM80.7 billion in new fiscal room

- RM34.2 billion from scrapping Budi95

- RM15 billion from STR and Sara

- RM16.7 billion from replacing SST with GST

- RM14.8 billion from other taxes and GLC dividends, net of a RM10 billion drop in Petronas dividends

Of this, RM55 billion would go towards new programmes, with the remainder allocated to development spending, interest, inflation costs, GST sharing with states, and RM4.5 billion in deficit reduction. Revenue would rise to RM392 billion in 2027 from RM360 billion.

Rafizi said a B40 household would lose around RM215 a month from the subsidy changes but receive about RM582 in allowances, resulting in a net gain of RM367.

Bersama estimates net gains of RM557 for the median household and RM539 for M40 households. These would amount to 11.2 percent of disposable income for B40 households including the pension, or 5.1 percent without it; 9.2 percent for the median household; and 7.4 percent for M40 households.

The trade-off, Rafizi said, is that those who consume more would pay more.

All projections are Bersama’s own, based on assumptions including Brent crude trading at US$90 a barrel and real GDP growth of 4.0 to 4.5 percent in 2027.

Under those assumptions and its proposed measures, the 2027 deficit would fall to 3.0 percent of GDP, or RM70.3 billion, while debt would fall to 63.6 percent. By 2031, the deficit would fall to 1.8 percent, with Bersama projecting that its package would put the federal budget on course for its first surplus since 1997 by 2035.

The political bet

Bersama’s document also addresses what it calls the “myth” that reforms cannot be implemented. It argues that much of the criticism of Anwar’s administration stems from a perceived reluctance to pursue structural reforms that are “difficult and carry political costs”.

Acknowledging that structural reform will inevitably cause discomfort as households, businesses, and the government change long-established habits, Bersama said the “political mistake” was assuming Malaysians would reject reform simply because it carries a cost.

“Malaysians are capable of accepting difficult changes when the purpose is clear, the burden is shared fairly, and, most importantly, they can see what they receive in return.

“This is why fiscal reform cannot simply mean collecting more revenue for the government.

“Higher taxes without a tangible increase in household income, wages, and economic security will reasonably be viewed as asking ordinary citizens to pay more for essentially the same outcomes,” it stressed.

Bersama argued that the greater political risk lies not in reform, but in maintaining the status quo. Avoiding difficult decisions for fear of losing votes, it said, only delays necessary adjustments while economic costs continue to grow.

It therefore pitched the package as a “generational new deal between the government and citizens”, in which citizens contribute more efficiently and fairly when necessary while Putrajaya guarantees stronger economic security, more credible institutions, and more equitable opportunities.

- Mkini