In the wake of the east Asian economic crisis, the health budget for the public sector in Malaysia was cut by 12%. The Ministry of Health responded swiftly with a series of broad-based and specific strategies. There was a careful examination of the operating expenditure and where possible measures were taken to minimise the effects of the budget constraints at the service interface. The MOH reprioritised the development of health projects. Important projects such as rural health projects and training facilities, and committed projects, were continued. In public health, population-based preventive and promotive activities were expected to experience some form of curtailment. There is a need to refocus priorities, maximise the utilisation of resources, and increase productivity at all levels and in all sectors, both public and private, in order to minimise the impact of the economic downturn on health.