Indonesia Keeps 2026 Budget Deficit on Track at 2.85% of GDP Despite Rp 415.8 Trillion Subsidy Bill

JAKARTA, Investortrust.id — The Indonesian government affirmed on Friday that the 2026 State Budget (APBN) deficit remains firmly on track to meet its full-year projection of 2.85% of gross domestic product (GDP), even as subsidy and compensation disbursements climbed to Rp 415.8 trillion to cushion domestic purchasing power against volatile global energy prices.

Finance Minister Suahasil Nazara reported that the cumulative fiscal deficit stood at Rp 379.3 trillion, or 1.47% of GDP, as of Oct. 31, 2026. The shortfall reflects Rp 2,618 trillion in realized state revenue against Rp 2,997.2 trillion in total expenditure. "This is on track toward a deficit of 2.85% of GDP," Suahasil said during the November edition of the APBN KiTa press briefing at the Ministry of Finance in Jakarta.

The 2.85% deficit projection reflects an upward revision from the initial 2026 budget target of 2.68% of GDP. While the fiscal trajectory aligns with the government's updated outlook, the final year-end balance will hinge on revenue collection momentum, year-end spending acceleration, and financing requirements across November and December.

Revenue Outpaces Spending Growth

Robust revenue collection has provided a critical buffer for fiscal management amid mounting social protection demands. State revenue expanded 23.9% year-on-year through October, reaching 83% of the annual target, whereas state expenditure rose 15.6% to achieve roughly 78% of its budget ceiling. "This is a good result. Looking at state revenue and expenditure, the 10-month implementation of the APBN is on track," Suahasil noted.

Fiscal pressures over the past ten months stemmed largely from surging global crude prices and rupiah depreciation. To cover rising reimbursement obligations to state energy utilities, the government raised its full-year energy subsidy and compensation estimate by 47.9%—or Rp 162 trillion—from an initial allocation of Rp 338 trillion to Rp 500 trillion in its first-half budget review.

That Rp 500 trillion figure represents the full-year ceiling earmarked specifically for energy support, distinct from the Rp 415.8 trillion disbursed through October across both energy and non-energy programs. Actual payouts during the 10-month period comprised Rp 261.4 trillion in direct subsidies and Rp 154.4 trillion in compensation payments, marking a 32% jump from the Rp 315 trillion recorded in the same period last year. "This is in order to safeguard people's purchasing power," Suahasil said.

Although the ministry reported that the Rp 415.8 trillion disbursement equates to 93% of its baseline presentation target, officials cautioned against measuring that absorption rate directly against the Rp 500 trillion energy ceiling due to differing budget scopes. Earlier, on Nov. 3, Suahasil disclosed that energy subsidy and compensation transfers specifically paid to state oil firm PT Pertamina and state utility PT Perusahaan Listrik Negara (PLN) had reached Rp 333.9 trillion as of Oct. 30, with remaining obligations scheduled for settlement through year-end.

Cushioning Households and Small Businesses

By absorbing upstream cost increases caused by expensive crude and a weaker currency, the subsidy mechanism prevents immediate price shocks at the retail pump and utility meter, thereby containing secondary inflationary pressures across transportation, food logistics, and small-scale manufacturing.

Disbursement volumes underscored broad distribution across consumer and productive sectors through October. Subsidized fuel distribution rose 9.5% year-on-year to roughly 15.244 million kiloliters, while three-kilogram liquefied petroleum gas (LPG) distribution grew 2.3% to 6.5 million metric tons, and electricity subsidies reached 43.5 million customers, up 2.3%. Beyond energy, subsidized fertilizer distribution climbed 9.7% to 7.1 million metric tons, while interest rate subsidies for the People's Business Credit (KUR) program expanded 7.7% to reach 4.2 million borrowers.

Year-End Spending Surge and Primary Surplus

On the revenue side, tax and customs receipts rose 20.8% year-on-year to Rp 2,064 trillion through October, comprising Rp 1,796.8 trillion in tax revenue—up 23.2% to reach 76.2% of its target—and Rp 267.2 trillion in customs and excise duties, which grew 7.2% to hit 79.5% of its goal. Non-tax state revenue (PNBP) surged 37% to Rp 551.8 trillion, already surpassing its annual target at 120.2%.

Central government spending totaled Rp 2,343.6 trillion, split between Rp 1,239.1 trillion in ministry and agency outlays and Rp 1,104.5 trillion in non-ministry expenditures, while transfers to regional governments reached Rp 653.6 trillion. Goods expenditure stood at Rp 543.3 trillion—including Rp 169.6 trillion for the government's Free Nutritious Meals program—alongside Rp 320.4 trillion in personnel spending and ongoing social assistance programs.

Suahasil projected a sharp pickup in disbursements over the final two months of the year as government agencies settle vendor contracts, preparing roughly Rp 945.2 trillion in spending for November and December to meet the full-year expenditure outlook of Rp 3,942.4 trillion against projected revenue of Rp 3,208.1 trillion. "As usual, ministries and agencies finalize all contracts in December, so ongoing work will largely be paid out in December," he explained.

To support local economies, the government also raised its full-year regional transfer allocation from Rp 693 trillion to Rp 726.2 trillion. Meanwhile, the primary balance—which excludes debt interest payments—maintained a surplus of Rp 114.8 trillion through October, though Suahasil cautioned that year-end spending acceleration and interest obligations will shift the final figure toward the projected full-year nominal deficit of Rp 734.3 trillion. Budget financing realization reached Rp 595.2 trillion against an initial annual target of Rp 689.1 trillion.

External Headwinds and Capital Flows

Global crude volatility remains the primary external risk to fiscal stability. Suahasil noted that while Brent crude has retreated after briefly touching $116 per barrel, earlier price spikes continue to lift the annual average price baseline. "We must remain vigilant because the impact on the APBN is based on the full-year average. So if it spikes high at any point, the annual average gets pulled up," he said. Through October, the Indonesian Crude Price (ICP) averaged $94.4 per barrel, well above both the initial budget assumption of $70 and the first-half outlook of $83 per barrel.

Policymakers are also monitoring elevated interest rates in advanced economies, China's slowing third-quarter GDP growth of 4.5%—down from 4.8% a year earlier—contracting Chinese fixed-asset investment, and potential valuation corrections among U.S. artificial intelligence technology firms. Despite global market jitters, Indonesia recorded net foreign inflows of Rp 43 trillion into government securities (SBN) and Rp 182.4 trillion into Bank Indonesia Rupiah Securities (SRBI), offsetting roughly Rp 97 trillion in net outflows from the domestic equity market.

Rp 33.69 Trillion Disbursed for Disaster Recovery

Alongside macroeconomic stabilization, the 2026 budget allocated Rp 59.35 trillion for disaster management, with Rp 33.69 trillion—or roughly 57%—disbursed as of Nov. 10.

The largest share, totaling Rp 50.84 trillion or 85.7% of the disaster budget, is dedicated to rehabilitation and reconstruction across Sumatra following major disasters in late 2025, with Rp 30.78 trillion (60.5%) realized through October via ministerial spending and regional transfers. The government also earmarked Rp 970 billion for disaster response in East Nusa Tenggara (NTT), Rp 2.43 trillion for other disaster contingencies, and Rp 5.11 trillion for forest and land fire mitigation across seven ministries and the National Disaster Management Agency (BNPB), of which Rp 1.17 trillion or 22.9% had been utilized by Oct. 31.