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BY SHEILA ROZARIO
IN an era defined by climate urgency and economic recalibration, Malaysia’ s Budget 2026 marks a decisive shift: a fiscal blueprint that embeds sustainability at the heart of national growth. Prime Minister Datuk Seri Anwar Ibrahim has crafted not just an annual spending plan but a statement of intent— to make the country’ s environmental and economic destinies converge. The headline numbers may read like a conventional budget— RM 470 billion in total expenditure, a deficit target of roughly 3.5 per cent of GDP, and growth projections of 4 – 4.5 per cent— but beneath those figures lies a deeper narrative. As As Anwar reflected in Parliament:“ We choose the winding, difficult path of reform, strict fiscal discipline and institutional strengthening, as the only path that ensures the nation is saved in the long run.”
Budget 2026 represents Malaysia’ s green turn: an attempt to reconcile fiscal realism with environmental ambition, linking
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renewable energy, biodiversity protection, carbon management, and ESG integration into a single national mission.
ENERGY TRANSITION
At the heart of this new trajectory is renewable and sustainable energy— now elevated to“ High Growth, High Value” status under the 13th Malaysia Plan( 13MP) and the National Energy Transition Roadmap( NETR). The budget reinforces that ambition, with policies and incentives aimed at transforming Malaysia’ s energy landscape from fossil-fuel dependence to diversified clean-energy leadership.
Malaysia is targeting 37.8 per cent renewable energy in its installed electricity capacity by 2030, rising from roughly a quarter today. To reach that goal, the government is accelerating investments in solar, biomass, biogas, hydro, and exploring green hydrogen and small modular reactors( SMRs) for long-term baseload stability.
In his address, Anwar pledged that the energy transition would
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not be a marginal sideline, but a core driver of economic renewal:
“ The government will go ahead with a proposed carbon tax from next year, starting with the iron, steel and energy sectors,” said Anwar.
Banks and investment analysts responded positively, describing renewables as“ a growth engine that fuses competitiveness with climate responsibility.” Green finance tools— sustainability-linked loans, green sukuk, and blended instruments— are expected to expand, supported by fiscal breaks for green technology projects and low-carbon industrial conversion.
More than merely meeting climate obligations, Malaysia’ s energy transition is being framed as economic re-engineering— a pivot toward high-value industries that generate jobs, attract global capital, and reduce climate-related risks.
PROTECTING NATURAL CAPITAL
Beyond megawatt counts and tax codes, Budget 2026 reaffirms Malaysia’ s identity as one of the
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world’ s megadiverse nations. It renews the national pledge, first enunciated decades ago, to maintain at least 50 per cent of the land area under forest cover— a target Malaysia currently exceeds, with forest cover around 54.6 per cent.
This year’ s budget reimagines forests not just as conservation zones but as natural capital— living infrastructure that secures water supply, regulates microclimates, guards against floods, and even underpins carbon markets. Funds are directed toward river rehabilitation, reforestation, biodiversity corridors, and community-based ecological stewardship.
Parallel to this, Malaysia is accelerating its embrace of a circular economy. Budget 2026 champions waste-to-energy projects, enhanced recycling networks, biodegradable packaging standards, and sustainable agriculture models— from agroforestry and biochar to precision farming techniques.
In his presentation, Anwar framed environmental integrity as non-negotiable:
“ We choose the winding, difficult
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