Parliament moved a step closer to approving an even bigger spending allocation and a wider fiscal deficit forecast for President Prabowo Subianto than he had sought for the 2026 budget.
Anti-government protests that began in August have unsettled financial markets, leaving investors watching Indonesia’s fiscal plans for signs of weakening discipline after respected finance minister Sri Mulyani Indrawati was sacked last week.
A parliamentary fiscal oversight panel approved a total spending plan of 3,842.7 trillion rupiah (RM977bil) in the 2026 budget, Said Abdullah, its chair, said.
That figure is 56.2 trillion rupiah (RM14.24bil) higher than Prabowo’s August proposal to parliament, and about 9% higher than estimated total spending for 2025.
A wider parliamentary vote is expected on Sept 23. Parliament, overwhelmingly controlled by Prabowo’s coalition, usually passes the panel’s endorsement.
The wider deficit plan was fine, said new finance minister Purbaya Yudhi Sadewa, adding, “It’s still below 3% (of GDP) and is needed to create higher economic growth. Don’t worry, we will be prudent.”
Prabowo has set a GDP growth target of 5.4% for 2026, aiming for a rate of 8% within his five-year term, which runs until 2029.
The government is seizing the chance to pursue policies that drive growth with the wider fiscal gap as the US Federal Reserve looks likely to maintain an accommodative stance until the first half of 2026, said Victor Matindas, an economist with one of Indonesia’s biggest banks, BCA.
Indonesia must find ways to increase revenues from non-tax sources, rather than relying on bonds issuance to plug the widening budget gap, said Telisa Falianty, an economist with the University of Indonesia. — Reuters
