Federal grants to Malaysian states expected to exceed RM10.5bn in 2026

The enhanced allocations aim to support infrastructure, tourism, and state finances.

Federal grants to Malaysia’s state governments will continue to be improved and are expected to exceed RM10.5bn in 2026.

The decision was agreed on at the National Finance Council (MKewN) 2026, chaired by Dato’ Seri Anwar Ibrahim, Prime Minister and Finance Minister. The council agreed to enhance several Federal Government grants to state governments, particularly the joint list grant, the state road maintenance grant, and the distribution of tourism tax.

The increase continues the earlier improvement of the per capita grant (PMBO) rate starting in 2026, as outlined by the MADANI Government.

To improve the sustainability of state governments’ cash flow, the council also agreed to enhance the channeling mechanism under the joint list.

According to PM Anwar, the MADANI Government is committed to improving the Federal Government’s grants to all state governments every year for the benefit of people across the country, regardless of state or region.

“As enshrined in the MADANI Economic Framework, the country's surplus revenue must be distributed equitably and underpinned by good governance,” he added.

Federal Government grants have increased from RM8.1bn in 2022 to RM10.3bn in 2025 and are expected to reach RM10.5bn in 2026.

For the 2026 National Finance Council, the state road maintenance grant has been enhanced with an expanded scope. This includes the procurement of modular steel panel bridges (bailey bridges), as well as repairs and the expansion of drains and ditches along state roads.

The council also agreed to bring forward the disbursement of all grants under the joint list.

In conjunction with Visit Malaysia Year 2026, the Federal Government will also fully distribute 100% of tourism tax collections to the respective state governments. Currently, only 50% of the collections are shared with states.

PM Anwar added that the MADANI Government remains open to working closely with all state governments, regardless of political stance, noting that improving this provision is important to strengthen socio-economic development and critical infrastructure across the country.

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Lead image / Ministry of Finance