All the tough talk at UNGA, yet the market takes a different cue

 

The theme of The Edge HSBC Pre Budget 2027 Roundtable discussion was the challenges to the fiscal consolidation coming from external uncertainties. Read HERE.  

After the display of power, defiance and political legitimacy from the three appearances together at the UN General Assembly — US President Donald Trump on September 22, Iranian President Masoud Pezeshkian on September 23, and Israel Prime Minister Benjamin Netanyahu on September 24, 2026, followed by a mass walkout by 73 countries representatives, one would not have expected market to react as it did last night.

Following the UN General Assembly spectacle to project an image of political strength and certainty, the oil market told a different story. 

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Beyond the Debt Blame Game: Malaysia Needs an Honest Conversation

The national debt is approaching RM1.4 trillion. Yes, it is large. Yes, it deserves scrutiny. 

But Malaysia needs something more useful than another round of political arithmetic over which Prime Minister accumulated more debt.

Early this year, the Prime Minister's remark that there would be no new borrowing has been seized upon by his critics as evidence of another broken promise. It may well have been an unfortunate slip of the tongue, particularly when made in the heat of a political rally. 

But it should not become a substitute for discussing the much more important question: What is Malaysia actually doing about its debt trajectory?

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The Middle East Shock Returns: What It Means for Malaysia and Budget 2027

For a brief moment, Malaysia appeared to have gained some breathing space on the fuel subsidy front.

The feared explosion in the government's fuel subsidy bill did not materialise to the extent initially feared. The move towards targeted subsidies, particularly through BUDI95, gave the government greater control over its fiscal exposure while keeping subsidised RON95 at RM1.99 a litre.

But the latest developments in the Middle East are beginning to test that resilience.

The renewed confrontation involving Iran, the continuing uncertainty surrounding the Strait of Hormuz, the Houthi advance around Yemen's Red Sea coast and the temporary closure of Saudi Arabia's East-West oil pipeline have created a much more serious threat to global oil supplies. 

Brent crude has moved back above US$100 a barrel as markets increasingly price in the possibility of actual physical disruption rather than merely a geopolitical risk premium.

For Malaysia, the timing could hardly be more sensitive.

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El Niño Is Coming: What Malaysia Should Expect

 

Do you realised that lately, in the afternoon, the car air-conditioning does not seem to work? The air-conditioner may be working perfectly in the morning and evening, yet by mid-afternoon the car becomes unbearably hot and the cooling seems inadequate.

There may be nothing wrong with the air-conditioning. The problem is the extraordinary heat load outside. What we are beginning to experience is the early manifestation of a much larger weather phenomenon: El Niño.

El Niño is not simply “hot weather”. It is a disruption of the normal ocean-atmosphere system in the tropical Pacific that changes rainfall, temperature and atmospheric circulation over a huge area. 

The World Meteorological Organization now says the current El Niño is firmly established, is expected to strengthen to a very strong event, and has an almost 100% probability of continuing through February 2027.

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The Storm Has Not Passed

For many Malaysians, the recent decision by Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim to restore the monthly BUDI95 petrol entitlement to 300 litres will come as welcome news. The diesel entitlement has also been adjusted, providing some additional breathing space to households and businesses that depend heavily on their vehicles.

After months of discussion about subsidy rationalisation, the decision is understandable. It reflects a recognition that while targeted subsidy reform remains necessary, it must also take account of the realities faced by Malaysians, particularly those who drive long distances or depend on vehicles for their livelihoods.

More importantly, it suggests that the Government now has greater confidence in managing fuel consumption, enforcement and the fiscal implications of subsidies.

That is reassuring. But there is another message that Malaysians should not overlook. A more manageable domestic fuel situation does not mean that the international environment has become predictable. The pressure has merely become less immediate.

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Incorporating GST Features into SST

The recent report that Prime Minister and Finance Minister Dato’ Seri Anwar Ibrahim’s ministry is studying the possibility of incorporating some features of the Goods and Services Tax (GST) into Malaysia’s existing Sales and Service Tax (SST) has reopened an old and highly sensitive debate.

GST was abolished in August 2018. It had become one of the major political issues used by Pakatan Harapan (PH), together with the 1MDB controversy, in the campaign that brought down the Barisan Nasional government.

Yet GST has never really disappeared from public discussion. Supporters continue to argue that it is a more efficient and transparent tax system, while opponents remember the impact they associated with GST on the prices of everyday goods.

Recent changes have made the debate even more interesting. The government has increased SST rates and expanded its scope, while introducing other forms of taxation. The implementation of e-Invoicing has also prompted some critics to describe it as a “backdoor GST”.

There is therefore value in putting the politics aside for a moment and understanding what GST and SST actually do—and whether some of the strengths of GST can be incorporated into SST without bringing back the entire GST system.

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Never-ending Problem of Malaysian Government Agencies and GLCs: Beyond “Sakau”

 

Malaysia has experienced a long succession of controversies involving government agencies, statutory bodies and government-linked companies (GLCs). Tabung Haji, FELDA, FGV, Khazanah Nasional, MAS, LTAT, MARA and, most dramatically, 1MDB have at various times been associated with financial losses, questionable investments, governance failures or allegations of misconduct.

The political response is often predictable. The latest scandal becomes evidence that the previous government “sakau” — plundered — public institutions. There may indeed be cases involving corruption, abuse of power, fraud or criminal misconduct, and such cases must be investigated and prosecuted. But reducing every financial loss or failed investment to “sakau” is neither accurate nor useful.

The deeper problem is more serious. Malaysia appears to have a recurring institutional failure in the governance, management and oversight of government agencies and GLCs. The country has had numerous audits, investigations, parliamentary inquiries and restructuring exercises, yet similar problems continue to reappear.

The question therefore should not merely be, “Who stole the money?” It should also be, “Why was the system unable to prevent the loss, detect the problem early and ensure that the same mistake would not happen again?”

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