Indonesia Posts Rare Early Deficit of $1.9 Billion

JAKARTA, investortrust.id – Indonesia experiences a seldom-seen budget deficit in the early months of the year, underscoring a rising need for prudent spending measures to maintain economic stability.

The Ministry of Finance recorded an unusual early deficit of Rp 31.2 trillion (US$1.9 billion), reversing last year’s early surplus of Rp 26 trillion. This shortfall appears against the backdrop of Rp 316.9 trillion in state revenue during the first two months of 2025, prompting concern among policymakers regarding the balance between revenue generation and government expenditures.

Finance Minister Sri Mulyani Indrawati said the deficit has already reached 5.1% of the annual target of Rp 616.2 trillion in the 2025 State Budget. “We recorded a deficit of Rp 31.2 trillion by the end of February, or around 0.13% of our gross domestic product. This aligns with the 2.53% deficit-to-GDP design for 2025,” she announced at the ministry’s office in Jakarta on Thursday, Mar 13, 2025.

State Revenue Composition

Sri Mulyani explained that the shortfall stems from government spending outpacing total state revenue. Indonesia’s Rp316.9 trillion revenue so far includes Rp240.4 trillion in tax revenues, or 9.7% of the annual budget target, and Rp76.4 trillion in non-tax revenues (PNBP), or 14.9% of the target.

“Tax revenues amounted to Rp187.8 trillion from general taxation (8.6% of the target) plus Rp52.6 trillion from customs and excise (17.6% of the target),” said the former managing director of the World Bank.

Spending by Government Agencies

On the spending side, the state disbursed Rp 348.1 trillion, equivalent to 9.6% of the total 2025 budget. Of that amount, Rp 211.5 trillion, or 7.8% of the budget, went to central government spending, while Rp136.6 trillion, or 14.9%, was allocated as transfers to local authorities.

“We have already transferred Rp136.6 trillion to regional governments, which, in percentage terms, shows a faster rate of spending compared to central government expenditures,” she said.

By comparison, ministry/agency (K/L) spending in the same period was lower than last year’s pace. As of late February 2025, K/L spending was Rp83.6 trillion, while non-K/L spending was Rp127.9 trillion. Over the same stretch in 2024, K/L spending had reached Rp120 trillion and non-K/L spending Rp119.63 trillion.

 

Financing on the Rise

Meanwhile, Sri Mulyani reported that government financing through late February soared to Rp220.1 trillion, or roughly 35% of the 2025 budget target, reflecting a notable “front-loading” approach to debt issuance in the first two months of the year.

“This implies that the government is raising funds earlier in the year. Issuance volumes have been quite substantial so far,” she said.

She also noted that the primary balance posted a surplus of Rp48.1 trillion. The primary balance is total state revenue minus government expenditures, excluding interest payments on public debt.

Under the 2025 State Budget, interest payments on public debt rank as the third-largest spending category, following transfers to regional authorities (the highest expenditure) and education (second place).