KOTA KINABALU, April 14 — The federal government has reached an agreement with the Sabah government on the contentious issue of the annual Special Grant amount owed to the state.

In a joint statement today, Prime Minister Datuk Seri Ismail Sabri Yaakob and Chief Minister Datuk Seri Hajiji Noor announced that they reached an agreement for a 4.7-fold increase in the grant from RM26.7 million to RM125.6 million for this year.

"The amount will be increased every year from 2023 to 2026 according to an agreed rate.

"At the same time, negotiations for claims of 40 per cent of the total income from Sabah will continue along with further study of the claim as per Article 112D of the Federal Constitution to reach a consensus on the annual grant that will meet the needs of the state without damaging the federal government’s financial position,” they said.

If a consensus is reached before 2026, then the new amount will take the place of the annual grant payments beginning 2022.

The consensus is a landmark agreement that has been a thorny issue for many years that was discussed by a Joint Consultative Committee and agreed upon on February 14 earlier this year.

This agreement is significant, given the last time there was a review on the rate was in 1969.

"It was agreed upon without prejudice of the federal government obligation and rights and of the state’s to continue the review process, under the law.

In their statement, the PM and Sabah CM also acknowledged that Sabah has the right to rely on the original formula as stated in Article 112C and Section IV of the 10th Schedule, and both state and federal governments will continue to supply each other data and information of their respective finances.

"The needs of the state regarding the service costs will be taken into account in the review too.

"The agreement is symbolic of the Keluarga Malaysia spirit, the commitment of the Malaysian government to the Malaysian Agreement 1963, and for the continued development of the state.

"We also appreciate the delegates from both sides, led by the Finance Minister and the State Finance Minister II in coming to this historic agreement,” they said.