(Jan 8): Indonesia’s fiscal deficit hit the highest level in at least two decades, outside of the pandemic, approaching the legal cap of 3% of gross domestic product in President Prabowo Subianto’s first full year in power.
The budget shortfall stood at 695.1 trillion rupiah (US$41.4 billion or $53.2 billion) or 2.92% of GDP in 2025, Finance Minister Purbaya Yudhi Sadewa said in a briefing on the unaudited figures. That exceeded both the original target of 2.53% and a revised goal of 2.78%. Bloomberg data going back to 2005 show the deficit ratio was the highest on record outside the pandemic years of 2020 and 2021.
Purbaya said the deficit widened as the government sought to maintain spending “with the mission of keeping the economy expanding amid high global uncertainty,” while ensuring that the shortfall did not exceed the 3% limit, set in the aftermath of the 1997-1998 crisis.
The deficit underscores the mounting fiscal challenges facing Prabowo as he strives to boost growth with populist initiatives even as revenue dwindles due to a slowing economy. The metric is closely eyed by investors, mindful of the risks of fiscal slippage in a country that spent decades rebuilding its international credibility after receiving a bailout during the Asian financial crisis.
The rupiah held a small loss against the dollar after the budget data, while the benchmark 10-year government bond yield was unchanged. Stocks erased earlier gains.
The fiscal deterioration is likely to intensify scrutiny of Finance Minister Purbaya, who took office in September, as his early policy moves have yet to deliver a meaningful boost to growth or revenue. Last week, Purbaya pulled back about US$4.5 billion of the government’s cash deposits in state-owned banks, admitting that while the funds had eased short-term liquidity, his major initiative has so far done little to spur productive lending.
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Purbaya succeeded the veteran Sri Mulyani Indrawati, whose fiscal probity made her an investor favourite. She was replaced in September after popular protests over the cost of living.
Uploaded by Magessan Varatharaja
