Where Does Malaysia Get The Money For Budget 2025?

Now that we’re already in October, it also means one very important thing for us as Malaysians; it’s the month where our annual Federal Government Budget will be tabled by the ruling government.

As usual, with the impending tabling of the Budget, there will be a lot of chatter regarding the budget itself, and all of the goodies that the ministries and other government agencies will get.

But before we get to all that, how about we have a look first at where actually the Malaysian government gets the money for the Budget, and how much do they have to play with this year.

What money do we use for the Malaysia Budget 2025?

So let’s answer the first question, where does the money for the Budget come from? To answer this question simply, it’s from the country’s revenue.

According to the Ministry of Finance’s Updates on Economic And Fiscal Outlook And Revenue Estimates 2024, 2023’s actual federal government revenue came in at RM303.2 billion. The rest of the funds to make up the Budget 2024 expenditure of RM393.8 billion came from borrowings and the use of government assets.

So how much revenue is the government projecting to fund Budget 2025?

The number provided by MoF is RM307.6 billion. Deputy Finance Minister Lim Hui Ying had also updated in Parliament earlier this year that the Federal Government’s 2024 revenue is projected to increase to RM312.159 billion.

This is due to the higher tax revenue collection and better economic growth outlook.

Where does the Federal Government’s 2024 revenue come from?

Here’s a breakdown provided in the MoF’s fiscal outlook report.

According to this pie chart, a huge bulk of the government’s revenue, 44.4% of it to be exact, came from purely income tax.

The next big chunk, 21.9% of the revenue comes from borrowings and government’s assets, followed by 16.2% from non-tax revenue, 14.9% from indirect taxes, and 2.6% from other direct taxes.

This also means that all together, taxes alone make up 61.9% of the government’s revenue.

Which also underlines the importance of the annual budget, as it shows us a picture of where our hard earned income taxes go.

What are the other sources of income for the government budget?

As we all know, diversifying is a must to ensure that not all of your eggs are in one basket, and the government is no exception to this rule.

Which is why 38.1% of the country’s revenue comes from non-taxation sources.

This includes multiple sources of income, such as the non-tax revenue, which stands at 16.2%.

However, it needs to be said that there is a 2.7% decrease of the non-tax revenue, partly due to lower dividends from Petronas, and lower investment yields.

This year, it is estimated that Petronas will pay dividends amounting to RM32 billion, which is significantly lower compared to last year’s total of RM50 billion.

Following this, a significant amount is also contributed by licences and permits, which stands at RM15.5 billion. This number is also lower than the previous year however, due to lower proceeds from motor vehicle licences and levy on foreign workers.

Non-taxation sources also include borrowings and use of government assets, which makes up 21.9% of Malaysia’s revenue.

What do you want to see from Budget 2025?

So there you have it, that’s where the money for our annual budget comes from. As you can see, a large chunk of the government expenditure is also funded by debt to cover the shortfall. For 2024, this was in the form of borrowings and use of government assets amounting to 21.9% of Budget 2024.