Reducing Spending, Increasing Confidence

Indonesia's state budget deficit stood at Rp 180.4 trillion (0.7% of GDP) by May 2026, a figure the government describes as under control. However, this snapshot from the fifth month of the year may not reflect the full picture, as critical economic variables have shifted significantly from initial projections.

The state budget is built on two sensitive macroeconomic assumptions: the rupiah exchange rate and Indonesian crude oil prices. When the 2026 budget was drafted, the government anticipated an exchange rate of around Rp 16,800 per dollar and crude oil prices near $70 per barrel. Reality has diverged sharply, with the rupiah reaching Rp 18,000 and oil prices exceeding $100 per barrel.

The Ministry of Finance's own sensitivity analysis indicates that every Rp 100 weakening of the rupiah adds Rp 0.8 trillion to the deficit, while every $1 increase in oil prices adds Rp 6.8 trillion. With these deviations, the projected deficit could balloon from Rp 689 trillion to nearly Rp 943 trillion, surpassing the legal limit of Rp 771 trillion (3% of GDP).

This widening deficit is not an isolated external factor but a consequence of active policy choices. Government spending has surged by 34.4% compared to the same period last year. While state revenue has improved with 19.1% growth after a severe contraction in 2025, it has failed to keep pace with expenditures. The government is spending money far faster than it is earning it, creating the underlying pressure on the budget.