3% deficit cap revision puts Indonesia’s fiscal credibility at risk
The House is currently discussing revisions to Law No. 17/2003 on state finance, which has long been used to anchor annual budgets by limiting the deficit to 3 percent of GDP and accumulated debt to 60 percent of GDP.
The Indonesian House of Representatives is considering changes to Law No. 17/2003 on state finance, a cornerstone of the country's fiscal management since the 1997-1998 financial crisis. The proposal would revise the deficit cap from the current 3 percent of GDP to a more flexible policy, according to Lawmakers and analysts. Critics argue that changing the deficit limit could negatively impact Indonesia's fiscal credibility and sustainability.
Muhammad Misbakhun, chairman of the House Commission XI responsible for financial affairs, has called for a reevaluation of the limit, suggesting that fiscal policy requires more flexibility to support economic growth, enhance welfare, and help Indonesia overcome the middle income trap. He emphasized that the 3 percent deficit is not a predetermined rule but an outcome of the difference between state revenue and expenditure.
Misbakhun questioned why both the deficit limit and debt ceiling are treated as legal absolutes in the law, suggesting they could be reviewed more flexibly.
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.
