# The Federal Budget Cycle: How a Speech Becomes a Supply Act

> The real process behind Malaysia's federal budget — from the Treasury's expenditure ceiling, through presentation in the Dewan Rakyat, the policy stage and the committee stage, to the Supply Act being gazetted.

- Category: economy
- Language: en
- Status: published
- Updated: 2026-07-24
- Canonical: https://negaraku.md/en/economy/federal-budget

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On 31 December 2025, the Supply Act 2026 was gazetted. The amount it
authorises: **RM229,080,812,700**.

But the budget headlines from the preceding October cited RM419.2
billion. Both figures are correct. The gap between them is the best
way in to understanding how the federal budget actually works — and
why "the budget" is not a single document, but a legislative cycle
that runs all year round.

## Short answer: six stages

| Stage | What happens | Legal basis |
| --- | --- | --- |
| 1. Preparation | The Treasury sets expenditure ceilings; ministries prepare estimates; Budget Examination Meeting | Treasury Circulars; MOF procedure |
| 2. Presentation | The Estimates are tabled at the Table of the House, followed by the first reading of the Supply Bill + the Development Estimates motion | Articles 99–100; Standing Order 65, 66(1) |
| 3. Policy stage | Second-reading debate, confined to general policy — maximum 13 days | Standing Order 66(3) |
| 4. Committee stage | Each head of expenditure is voted on one by one — maximum 20 days | Standing Order 66(5)–(17) |
| 5. Third reading | Decided without amendment and without debate | Standing Order 66(18) |
| 6. Dewan Negara & assent | The Dewan Negara may only delay for one month; then royal assent and gazettal | Articles 66, 67(1), 68 |

## Why the Supply Act is smaller than the budget

Article 104 of the Federal Constitution sets out only three exits for
money from the Consolidated Fund: money that is *charged* on it,
money authorised through a Supply Act, or money under Article 102.

Article 98, in turn, lists what is charged automatically — among them
all pensions and gratuities, and all debt charges. That expenditure
does not need to be approved afresh every year.

That is why the figure in the Supply Act is smaller. Of the RM338.2
billion operating expenditure for 2026, debt service charges (RM58.3
billion) and retirement charges (RM42.8 billion) do not appear in the
Supply Act's schedule because they are charged directly on the
Consolidated Fund.

The RM81 billion development expenditure is also not there. It is
approved through a separate resolution motion under subsection 4(3)
of the Development Funds Act 1966 — a motion brought together with
the Bill under Standing Order 66(2).

## Before the speech: the expenditure ceiling

The cycle begins far earlier than October, inside the Treasury.

The Budget Management Division issues directives and circulars for
preparing the estimates. Each ministry is given an **expenditure
ceiling** — an amount that may not be exceeded to fund **Existing
Policy**, meaning all programmes and activities that are already
running.

Anything new must be applied for separately as **New Policy** or a
**One-Off**. This three-way distinction is what determines whether a
ministry's proposal has any direct chance at all.

The proposal is then tested at the **Budget Examination Meeting**
between the Treasury and the ministry. The final outcome is locked in
through a **Programme Agreement** — an agreement on the inputs,
outputs and impact of each activity.

This is where most of the real decisions are made. By presentation
day, the figures are already final.

## Presentation day: not a single document

Standing Order 65 is clear: the Estimates of Expenditure must be
tabled at the Table of the House **before** the Supply Bill is
brought into the sitting. The budget speech accompanies the document;
it does not replace it.

The Public Finance and Fiscal Responsibility Act 2023 [Act 850] adds a
layer of mandatory documents. The Minister must table an **economic
outlook report** (section 32) and a **fiscal outlook report** (section
33) together with the statement of estimated revenue and expenditure.

The revenue estimate must show the actual collection of the preceding
year, the revised estimate for the current year and the estimate for
the following year (section 34). The expenditure estimate must set
out programmes and activities, development projects and programme
performance (section 35).

Only a Minister may bring in such a Bill, and it may not be
introduced in the Dewan Negara — that is the effect of Article 67(1).

## The policy stage: a timing rule rarely mentioned

Once the second-reading motion has been moved and seconded, the
debate **must be adjourned for not less than two days**. Standing
Order 66(3) gives Members of Parliament room to read the documents
before speaking.

When resumed, debate is confined to general policy and the
administration of the Government. A maximum of **13 days** is
allocated, and of those 13 days **not less than two days** are set
aside for ministerial replies.

This is not free-form debate. It is scheduled debate, with a
guillotine: at the time fixed by the Speaker on the last allotted
day, every question necessary to bring the discussion to a close is
put for decision.

## The committee stage: where ministries are tested

Once the second reading is passed, the Dewan Rakyat turns itself into
the **Committee of the whole House** — the same members, chaired
differently, with looser rules of debate.

A maximum of **20 days** is allocated. Schedules are disposed of
first, before clauses.

The Chairman reads the title of each head of expenditure in turn and
puts the question in a fixed form:

> "That a sum of RM… for the head… stand part of the schedule."

For the Development Estimates, the form is different: "That the
expenditure mentioned in the head… in the Development Estimates for
the year concerned be approved."

This is where **cut motions** happen. Any member may move an
amendment to reduce the allocation of a particular sub-head or item —
but at least **two days'** notice is required. If there are several
reduction motions, the smallest is moved first.

One important limit is often forgotten: debate on a head is confined
to the **policy of the service** the money is to be voted for, not
the details of expenditure.

## Third reading, the Dewan Negara and assent

Once all heads are disposed of, the Bill is reported to the House. A
Minister moves the motion for the third reading — and that motion is
**decided without amendment or debate**. The drama, if any, is
already over by the committee stage.

At the [Dewan Negara](/en/government/parliament), Article 68 gives
only limited power: if a Money Bill is sent there at least one month
before the end of the session and is not passed without amendment
within that month, it is presented to the Yang di-Pertuan Agong for
assent all the same — unless the Dewan Rakyat directs otherwise.

Whether a given Bill is a Money Bill depends on the opinion of the
Speaker of the Dewan Rakyat (Article 68(6)). The Speaker's
certificate that the provisions of Article 68 have been complied
with is, in turn, conclusive for all purposes and may not be
questioned in any court (Article 68(4)).

The 2026 cycle shows the actual timetable:

| Date | Event |
| --- | --- |
| 10 October 2025 | The Supply Bill 2026 and the Development Expenditure Estimates motion tabled |
| 15 December 2025 | Passed by Parliament |
| 22 December 2025 | Royal assent |
| 31 December 2025 | Gazetted as the Supply Act 2026 [Act A1781] |

## The shape of revenue and expenditure

| 2026 component | Amount | Note |
| --- | --- | --- |
| Total revenue | RM343.1 billion | 16.1% of GDP |
| — Tax revenue | RM270.4 billion | 78.8% of total revenue |
| — Direct tax | RM187.4 billion | CITA RM103.4 billion |
| — Indirect tax | RM83.0 billion | Including [SST](/en/taxation/sst-explained) |
| — Non-tax revenue | RM72.7 billion | Mainly investment income |
| Total expenditure | RM419.2 billion | 19.7% of GDP |
| — Operating (OE) | RM338.2 billion | 80.7% of total |
| — Development (DE) | RM81.0 billion | 3.8% of GDP |
| Fiscal deficit | 3.5% of GDP | Target of 3% by 2028 |

These figures are not chosen freely. The First Schedule to Act 850
sets quantitative values that must be reached over the medium term:
development expenditure **≥ 3%** of GDP, fiscal balance **≤ -3%**,
debt level **≤ 60%**, and financial guarantees **≤ 25%**.

If those objectives are not met, section 27 requires the Minister to
table a **fiscal adjustment plan** for approval through a resolution
of the Dewan Rakyat.

## Common mistakes

**"The budget is passed on the day it is presented."** No. For the
2026 cycle, the gap between presentation and Parliament's passage was
more than two months.

**"The Dewan Negara can reject the budget."** For a Money Bill,
Article 68 gives it only a one-month period, not a power of veto.

**"All government expenditure is in the Supply Act."** Pensions and
debt charges are charged under Article 98; development expenditure is
approved through the Development Funds Act 1966.

**"Once passed, the figures are final."** Article 101 allows
supplementary estimates and a Supplementary Supply Bill. Standing
Order 66A allows reallocation through a Minister's motion. Article 103
allows an advance from the Contingencies Fund for urgent and
unforeseen needs.

**"Oversight ends once the Act is gazetted."** Section 36 of Act 850
requires a mid-year expenditure performance report to be published no
later than **30 September** each year. The Auditor-General, in turn,
submits a report to be tabled in the Dewan Rakyat under Article 107.

## What's next

To read the primary sources yourself: Part VII of the [Federal
Constitution](/en/law/federal-constitution) (Articles 96–107)
provides the constitutional framework; Standing Orders 65 to 67
provide the Dewan Rakyat's detailed procedure; and Act 850 provides
the reporting obligations and fiscal targets.

For the macro context behind the revenue and deficit figures, see the
[overview of Malaysia's GDP](/en/economy/gdp-overview). For how
Parliament functions outside budget season, see the [Parliament of
Malaysia](/en/government/parliament).

## Sources

- Perlembagaan Persekutuan (Cetakan Semula 2020) — Bahagian VII: Peruntukan Kewangan — https://bhess.jpm.gov.my/wp-content/uploads/2024/06/Perlembagaan-Persekutuan-Cetakan-Semula-2020-1.pdf (Jabatan Perdana Menteri)
- Peraturan-peraturan Majlis Mesyuarat Dewan Rakyat — https://www.parlimen.gov.my/images/webuser/peraturan_mesyuarat/PMDR-bm.pdf (Parlimen Malaysia)
- Akta Kewangan Awam dan Tanggungjawab Fiskal 2023 [Akta 850] — https://mof.gov.my/portal/pdf/ekonomi/akta-850.pdf (Kementerian Kewangan Malaysia)
- Akta Perbekalan 2026 [Akta A1781] — https://mof.gov.my/portal/pdf/bajet/A1781_AKTA_PERBEKALAN_2026.pdf (Kementerian Kewangan Malaysia)
- Tinjauan Fiskal dan Anggaran Hasil Kerajaan Persekutuan 2026 — https://belanjawan.mof.gov.my/pdf/belanjawan2026/hasil/tinjauan_fiskal_2026.pdf (Kementerian Kewangan Malaysia)
- Belanjawan 2026 Diluluskan — https://www.mof.gov.my/portal/ms/belanjawan/belanjawan2026-diluluskan (Kementerian Kewangan Malaysia)
- Prosedur Kualiti: Penyediaan Anggaran Belanjawan Mengurus Tahunan (PS.PERB-04) — https://www.mof.gov.my/portal/pdf/warga/iso/PS.PERB-04.pdf (Kementerian Kewangan Malaysia)
- Belanjawan — Perlembagaan & Akta — https://mof.gov.my/portal/ms/belanjawan/perlembagaan-akta (Kementerian Kewangan Malaysia)

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