KUALA LUMPUR, 9 September 2025 — The federal government has announced a 25% increase in capitation grants for 2026, with total allocations rising to RM547.6 million, reflecting updated fiscal capacity and public needs. This enhancement—RM109.2 million above current levels—aims to support essential state-funded services such as schools and hospitals.
In a written response to the Dewan Negara, the Ministry of Finance (MOF) explained that this marks the first grant rate revision in 23 years, with the previous adjustment made in 2002. Reviewing the capitation formula was prompted by strong feedback from state governments, acknowledging rising administrative costs in service delivery.
“The revised grant structure employs a progressive tiered model: a 42% increase for the first 100,000 residents, 37% for the next half-million, 25% for the subsequent 500,000, and 15% for the remaining population,” the MOF clarified. This approach ensures that states with smaller populations—such as Perlis and Melaka—gain greater proportional increases, while larger, financially robust states like Selangor and Johor receive relatively smaller boosts.
Capitation grants, as outlined in Article 109(1)(a) of the Federal Constitution, provide vital support to state governments in covering operational expenditures. The government views the updated funding as an essential lifeline for maintaining service quality and fiscal equilibrium at the state level.
Context and Importance
For nearly two decades, capitation grants remained unchanged, leading to funding pressures in public service delivery. This proactive adjustment by the Madani Government signals an important recalibration of federal-state fiscal dynamics, ensuring that small and mid-tier states are better equipped to meet growing administrative demands.
As educational and healthcare costs continue to rise, the revamped structure also underscores the government’s commitment to equitable development across Malaysia—especially for provinces with less diversified economies.
