The 2026 Budget reveals a nation in fiscal handcuffs.
Findings by the Institute for Democracy and Economic Affairs (IDEAS) this month reveal a sobering reality: more than 60 per cent of the government’s operating expenditure is now swallowed by a “Legacy Trio” – emoluments, debt servicing, and a ballooning pension bill.
Specifically, RM109.4 billion is spent on salaries, RM42.8 billion on retirement charges, and RM58.3 billion on debt servicing. As a result, Development Expenditure (DE) is struggling to stay above 4 per cent of GDP.
We are effectively paying a premium to maintain the administrative structures of the 20th century while the 21st century’s demands go underfunded. Amid an ageing population, if left unchanged, we may soon be unable to fund the very projects needed to thrive, effectively leaving Malaysia behind its peers.
We must address the elephant in the room: Malaysia is slowly becoming a pension state.
To break this toxic cycle once and for all, we need the wisdom and courage to pursue the nuclear option – liberating the civil service for good.
The current civil service model relies on a “long-term reward”. Employees endure lower salaries today in exchange for a guaranteed long-term pension, effectively making retirement the ultimate goal.
This system may have worked in the 1970s, but today’s reality demands structural and constitutional reform if Malaysia is to remain functional and future-proof in the decades ahead.
As we move into 2026, our most critical professionals – doctors, engineers and accountants – find themselves trapped in a system that does not adequately reward their qualifications, instead offering the promise of an uncertain future.
What was once attractive no longer suits today’s professionals. A pension in 30 years does not help pay a mortgage in Johor Bahru today. While private sector peers benefit from income growth, public sector professionals are increasingly left behind in wealth-building and savings.
Critics will argue that professionalising the civil service by offering market-equivalent salaries, or close to them, will trigger a spike in emolument expenditure while the existing pension bill continues. They are right.
This is the “double-payment” phase.
For roughly two decades, the government would be paying for two parallel systems: competitive salaries at around 75 per cent of market rates for new professionalised hires, including EPF contributions, alongside legacy pensions – the RM42.8 billion and growing bill for those already retired or still within the pensionable scheme.
This higher spending must be viewed as a transitional cost for a better future. Refusing to make this investment now is to accept a permanent state of mediocrity and eventual fiscal insolvency.
By 2040, the pension bill alone is projected to reach RM120 billion if intake into the scheme is not closed. The choice is between a manageable short-term spike or a catastrophic long-term collapse.
Unlike the private sector, civil servants are constitutionally protected. Pension rights are clearly defined under Article 147 of the Federal Constitution, which legally binds the government to the pension rules in force on the day an officer first joined the service.
For a nation facing a 2026 fiscal crisis, this means Malaysia is still paying for administrative promises made in the 1970s and 1980s.
Any meaningful pension reform therefore requires more than a policy shift. It demands a constitutional amendment with a two-thirds majority in the Dewan Rakyat.
The landmark 2023 Federal Court ruling on pensions confirmed that even minor adjustments to the pension formula are legally unviable.
We can no longer afford to tinker at the edges with administrative circulars. Malaysia must decisively create a legally distinct, high-performance Professional Class outside the archaic “permanent and pensionable” framework.
This is a sacrifice required for a sustainable Malaysia.
The younger generation – students currently in lecture halls and junior officers beginning their service – depends on the wisdom and courage of today’s government to do the hard thing.
The 2026 Budget is a warning light. We can continue our decline, or we can choose the liberation of our public service.
It is time to choose the bravery of reform over the comfort of decay. We must decide whether we want a government that serves its history, or one that builds its future.
Irham Zulkernain is a writer from Kelantan and a student of Applied English Language Studies at Universiti Poly-Tech Malaysia in Kuala Lumpur.
The views expressed here are the personal opinion of the writer and do not necessarily represent that of Twentytwo13.
