Indonesia Considers Widening Budget Deficit Amidst Geopolitical Concerns
Jakarta – Indonesian Finance Minister Purbaya Yudhi Sadewa has indicated the possibility of increasing the country’s budget deficit beyond the current 3% of Gross Domestic Product (GDP) limit. This potential adjustment is being considered in response to growing global economic uncertainties, particularly stemming from geopolitical tensions in the Middle East.
Evaluating the Impact of Global Events
Minister Purbaya stated that any decision regarding the deficit will align with the direction of President Prabowo Subianto. “If we have an order, we will carry it out. I’m just the president’s hand,” he said, emphasizing the ministerial role as supportive of presidential directives. Antara News reported on this stance.
The potential widening of the deficit is largely attributed to the escalating geopolitical situation between Iran and the United States-Israel, which has led to a surge in energy prices and increased global instability. The Ministry of Finance is closely monitoring the impact of rising oil prices on the national budget.
Sensitivity to Oil Price Fluctuations
According to the Ministry’s calculations, a $1 per barrel increase in the Indonesian Crude Price (ICP) could add Rp6.8 trillion to the budget deficit. Currently, the ICP is set at $70 per barrel for the 2026 budget. If oil prices remain at $92 per barrel throughout the year without government intervention, the deficit could reach 3.7% of GDP. Antara News
Prudent Fiscal Policy and International Ratings
Despite the possibility of a wider deficit, Minister Purbaya assured the public that fiscal policy will remain prudent. He acknowledged concerns about potential negative assessments from international rating agencies, but noted that several countries already operate with deficits exceeding 3%.
Early 2026 Deficit Already Significant
Recent data indicates that Indonesia’s budget deficit reached Rp135.7 trillion in the first two months of 2026 (January-February), a 342.4% increase compared to the same period last year (Rp30.7 trillion). CNBC Indonesia reported that this increase is due to a shift in government spending patterns, with a more even distribution of expenditures throughout the year, rather than concentrating them at the end of the fiscal year.
Government spending in the first two months reached Rp493.8 trillion, although state revenue totaled Rp358 trillion. Detik Finance
One-Month Evaluation Period
Minister Purbaya has requested a one-month period to evaluate potential adjustments to the APBN, urging the public to avoid premature conclusions. Kompas.tv