Two Former Malaysian Ministers Exit Pakatan Harapan, Raising Stakes for Anwar Ahead of 2028 Election

Two former ministers leave ruling coalition

Former Economy Minister Rafiki Ramli and former Natural Resources and Environment Minister Nik Nazmi Ahmad announced on Sunday that they are resigning from Pakatan Harapan (PH), the coalition led by Prime Minister Anwar Ibrahim. The pair said they will contest the next general election under a new political grouping they have begun to organise.

Market context

Malaysia’s economy entered 2026 with a 5.4 % year‑on‑year GDP expansion in Q1, down from the 6.2 % pace recorded in the same quarter a year earlier. The slowdown reflects tighter global demand, higher input costs and lingering supply‑chain constraints. The fiscal deficit narrowed to 3.1 % of GDP in the first quarter, but the government’s debt‑to‑GDP ratio remains above 60 %, leaving limited fiscal space for large‑scale stimulus.

Political stability has been a key variable in investors’ risk assessments. Since Anwar took office in 2022, PH’s parliamentary majority has been thin, relying on a coalition of smaller parties and independents. The departure of two high‑profile ex‑ministers reduces the coalition’s parliamentary headcount and could trigger a realignment of alliances ahead of the 2028 election, which must be called by early that year.

What it means for investors and policy

1. Potential vote fragmentation – Rafiki and Nik Nazmi command sizable followings among urban, middle‑class voters. Their new platform could siphon support from PH in key swing constituencies such as Kuala Lumpur, Selangor and Penang, where the ruling coalition previously enjoyed narrow margins. A divided opposition may benefit the incumbent coalition in the short term, but could also force Anwar to negotiate with more fragmented partners, increasing policy uncertainty.

2. Fiscal outlook – Both ministers have advocated for progressive taxation and targeted social spending. If their new group gains parliamentary leverage, they may push for higher corporate tax rates or increased welfare outlays, which could affect profit margins for sectors reliant on domestic consumption, such as retail and consumer electronics.

3. Foreign investment sentiment – Malaysia has been positioning itself as a hub for high‑tech manufacturing and green energy. Political turbulence often translates into higher risk premiums for foreign direct investment (FDI). Recent data show FDI inflows fell to US$3.2 billion in Q1, a 12 % drop from the previous quarter. A clear policy direction from the new political actors will be essential to reassure investors.

4. Currency implications – The ringgit has been trading in a narrow band around RM4.45 per US$ since March. Any perception of a weakened governing majority could trigger short‑term volatility, especially if the new group demands policy shifts that affect the balance of payments.

Strategic takeaways

• Portfolio managers should monitor the evolving parliamentary arithmetic. Companies with heavy exposure to government contracts, such as construction firms and renewable‑energy developers, may face project‑approval delays if coalition negotiations become protracted.
• Equity analysts covering Malaysian banks should factor in a possible rise in credit‑risk provisions if fiscal consolidation pressures increase.
• Multinational corporations planning expansion in Southeast Asia may consider diversifying entry points to mitigate the risk of a sudden policy shift stemming from a reconfigured political landscape.

The exit of Rafiki Ramli and Nik Nazmi adds a new variable to Malaysia’s political calculus. While the ruling coalition retains a working majority for now, the emergence of a credible third force could reshape electoral dynamics and fiscal policy debates ahead of the 2028 general election.