PUTRAJAYA, 5 March 2026 – Federal grants allocated to Malaysian state governments are expected to rise to RM10.5 billion in 2026, reflecting the federal government’s continued effort to strengthen state finances and support nationwide development initiatives.
Prime Minister and Finance Minister Anwar Ibrahim said the increase was agreed upon during the latest meeting of the National Finance Council, which coordinates fiscal relations between the federal and state governments.
The projected allocation represents a steady rise in federal support to states, increasing from RM8.1 billion in 2022 to RM10.3 billion in 2025, and now expected to reach RM10.5 billion this year.
Higher Grants to Support State Development
According to the government, the expanded allocation is intended to strengthen the financial capacity of state administrations so they can implement socio-economic programmes and infrastructure projects more effectively.
The additional funding will include several key components:
- Shared List grants, which cover areas jointly managed by federal and state governments.
- State road maintenance grants, aimed at improving transport infrastructure and road safety.
- Distribution of tourism tax revenue, which will support state-level tourism development initiatives.
The government also plans to revise the per-capita grant formula, known as Pemberian Mengikut Bilangan Orang, beginning in 2026. The formula allocates federal funding to states based on population size.
Tourism Tax Fully Channelled to States
One notable change involves the tourism tax revenue distribution, where the federal government plans to channel 100% of tourism tax collections back to the respective states in conjunction with Visit Malaysia Year 2026. Previously, only about 50% of the tax proceeds were returned to states.
The new framework is expected to help states invest more aggressively in tourism infrastructure and promotional activities.
Improving Infrastructure Funding Mechanisms
The revised grant structure will also enhance funding for state road maintenance, expanding the scope of projects eligible for funding.
This includes infrastructure improvements such as:
- Procurement of modular steel panel bridges (Bailey bridges)
- Upgrading drainage systems
- Repairing culverts along state roads.
The federal government also intends to accelerate the disbursement process for Concurrent List allocations, allowing states to receive funds earlier and manage their cash flows more effectively.
Strengthening Federal–State Cooperation
Anwar emphasised that the increased funding reflects the government’s commitment to working closely with all state administrations regardless of political affiliation.
He said the enhanced grants are designed to ensure balanced development across Malaysia while strengthening critical infrastructure and socio-economic programmes nationwide.
For policymakers, the expanded federal support highlights the growing importance of coordinated fiscal planning between federal and state governments, particularly as Malaysia continues to pursue inclusive growth and regional development under the Madani economic framework.
