President Prabowo Subianto has reaffirmed Indonesia's commitment to maintaining the budget deficit below 3 percent of GDP, signaling fiscal discipline despite ambitious development plans as the country seeks to reassure investors of its macroeconomic stability.
The president's statement, reported by Kumparan, emphasized that the 3 percent threshold would only be breached in the event of a major crisis comparable to the COVID-19 pandemic, when Indonesia temporarily relaxed fiscal rules to fund emergency health and economic relief measures.
The commitment comes as Prabowo's administration pursues an expansive agenda including new capital city construction, downstream resource processing, infrastructure development, and expanded social programs. Markets have closely watched how the government would balance these ambitions against fiscal sustainability.
"The 3 percent deficit limit will not be changed unless there is a major crisis like COVID-19," Prabowo stated, reinforcing the legal framework established under Indonesia's State Finance Law that caps the deficit at 3 percent of GDP under normal circumstances.
The reassurance addresses investor concerns about potential fiscal expansion under the new administration. Prabowo campaigned on transformative economic policies, raising questions about how such initiatives would be financed without breaching deficit limits or significantly increasing the debt-to-GDP ratio.
Indonesia's fiscal discipline has been a cornerstone of macroeconomic stability since the 1997-98 Asian financial crisis, when runaway deficits and debt contributed to economic collapse. Maintaining credible fiscal rules has helped the country achieve investment-grade credit ratings and attract foreign capital.
The commitment to the 3 percent threshold signals continuity in economic management despite the change in administration. It suggests that technocrats in the Finance Ministry retain influence over fiscal policy, constraining more expansionary impulses from political leadership.
