Indonesian Finance Minister Sri Mulyani Indrawati. - Image from Jakarta Post
JAKARTA (Bloomberg): Indonesia posted an unlikely budget deficit as of February due to a double-digit drop in state revenues, adding to concerns about the health of government finances this year.
The shortfall stood at 31.2 trillion rupiah in the first two months of 2025, equivalent to 0.13% of gross domestic product, Finance Minister Sri Mulyani Indrawati said in a briefing on Thursday.
That reverses the budget surplus of 0.11% of GDP posted in the same period last year, according to Bloomberg-compiled data.
The last time Indonesia posted a budget deficit so early into the year was in 2021, when the government was ramping up spending to support the coronavirus-ravaged economy.
Indrawati said the shortfall "is still within our target designed for this year,” which stands at 2.5% of GDP.
State revenues suffered a 21% annual decline as of February, dragged down by a 30% dive in tax revenues, based on Bloomberg calculations of previously reported data.
This comes after President Prabowo Subianto rolled back a value-added tax hike that was set for this year. Problems with a newly implemented tax administration system, known as Coretax, also made it difficult for taxpayers to pay their dues.
The budget briefing on Thursday was the finance ministry’s first for the year and was much awaited given an unusual delay. Indrawati acknowledged the long wait, saying there was "very unstable” data the ministry had to consider due to various factors.
Other than last-minute move to scrap the VAT hike, Prabowo has also ordered his government to cut unnecessary projects and look for savings to be reallocated to his priority programs.
As such, state expenditures as of February slumped 7% year-on-year. Spending in ministries and agencies dropped by 30%, while spending on social assistance and subsidies accelerated.
The finance ministry likewise confirmed that the budget for Prabowo’s free meals program - a signature campaign pledge - has been more than doubled to 171 trillion rupiah for this year to reach 83 million beneficiaries.
As of mid-March, it has spent 710 billion rupiah for 2 million people.
-- With assistance from Norman Harsono.
-- ©2025 Bloomberg L.P.
