KUALA LUMPUR: Malaysia's total expenditure in 2025 is projected to be higher at RM421 billion or 20.2 per cent of gross domestic product (GDP).
This is primarily due to higher emoluments and retirement charges, resulting from the implementation of the Public Service Remuneration System (SSPA), as well as an increase in debt service charges.
The operating expenditure (OE) is expected to reach RM335 billion, equivalent to 16.1 per cent of GDP, while development expenditure (DE) is projected to remain at RM86 billion, or 4.1 per cent of GDP.
The government will pursue subsidy rationalisation initiatives to address leakages and wastages, while enhancing the social assistance programmes.
In addition, expenditure optimisation efforts will be further intensified, including the initiative to rationalise statutory bodies aimed at eliminating overlapping functions, thereby ensuring efficient spending and maximising outcomes.
Meanwhile, DE will primarily focus on the economic sector with the bulk allocated for financing infrastructure projects towards generating economic activities and promoting the quality of life.
This includes the construction of flood mitigation, water distribution projects and highways as well as improvement of health facilities and educational institutions.
The government's revenue collection is projected to grow by 5.5 per cent to RM339.7 billion or 16.3 per cent of GDP, driven by an increase in direct tax collection by 6.6 per cent, amounting to RM188.8 billion as well as a 9.8 per cent increase in indirect tax, totalling RM70.2 billion.
This is supported by sustained economic growth and higher corporate earnings, coupled with the phased roll-out of the e-Invoice as well as full-year implementation of the higher service tax rate and anticipated higher consumer spending.
As for non-tax revenue, it is projected to decrease slightly to RM80.7 billion on account of lower proceeds from investment income. However, the dividend from Petronas is expected to remain at RM32 billion.