Is Indonesia returning to fiscal orthodoxy?
The new finance minister may reassure nervous markets, but the real test begins when fiscal discipline inevitably collides with President Prabowo’s expansive political ambitions.
Indonesia may be returning to fiscal orthodoxy under the guidance of its new Finance Minister, Suahasil Nazara. The appointment comes after a period of economic uncertainty, with investors welcoming the move. However, the real test lies in maintaining fiscal discipline while Prabowo Subianto pursues his expansive political ambitions.
The proposed 2027 budget shows potential, with a projected deficit of 2.4 percent of GDP and revenue expected to rise by 6.8 percent. Yet, these figures depend heavily on Indonesia achieving an economic growth rate of 6 percent, a figure not seen since 2012.
Maintaining the deficit goal will require mid-year spending cuts if growth or revenue does not meet expectations. Revenue mobilization is also a concern, as Indonesia needs a stronger tax base but has been reluctant to broaden the tax net. Despite a commitment of significant funds to programs like free nutritious meals, energy security, and food security, Indonesia's tax revenue remains relatively stagnant at around 10 percent of GDP.
Written by urgent.news from The Jakarta Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
