Airlangga Convenes Coordination Meeting on Emergency Fiscal Rule to Address Budget Deficit

Jakarta – Senior economic ministers of the Red and White Cabinet began arriving at the office of Coordinating Minister for Economic Affairs Airlangga Hartarto on Monday afternoon, 16 March 2026, to attend a restricted coordination meeting (Rakortas).

Finance Minister Purbaya Yudhi Sadewa, Head of Bappenas/Minister of National Development Planning (PPN) Rachmat Pambudy, and Deputy Minister of Public Works Diana Kusumastuti were among those present.

According to information received, the Rakortas scheduled for approximately 13:30 WIB was convened to follow up on discussions from a full cabinet meeting at the State Palace on Friday, 13 March 2026, with President Prabowo Subianto.

One key agenda item was preparation of an Emergency Presidential Decree (Perppu) to anticipate projected increases in the state budget deficit resulting from geopolitical conditions in the Middle East that have driven up crude oil prices.

At the cabinet meeting, Airlangga proposed the Perppu to provide government flexibility in managing fiscal challenges. He warned that global oil prices risk straining public finances amid geopolitical uncertainties, particularly the conflict in the Middle East involving the United States and Israel with Iran, which has disrupted global oil supply.

Airlangga based the proposal on multiple risk scenarios calculated to assess the impact of Middle East conflict over six to ten months, with average global crude oil prices rising to either US$97 or US$115 per barrel.

Beyond oil prices, the scenarios account for exchange rate movements against the US dollar, government bond yields, and potential economic growth disruption from conflict pressures on the 2026 budget deficit.

Under the first scenario, with Indonesian crude oil price (ICP) of US$86 per barrel, exchange rate of Rp 17,000 per dollar (compared to the budgeted assumption of Rp 16,500), growth maintained at 5.3%, and government securities yields at 6.8%, the deficit would reach 3.18%.

The second moderate scenario projects ICP at US$97 per barrel, exchange rate of Rp 17,300, growth of 5.2%, and securities yields of 7.2%, producing a deficit of 3.53%.

The worst-case pessimistic scenario envisages ICP at US$115 per barrel, exchange rate of Rp 17,500, growth of 5.2%, securities yields of 7.2%, resulting in a deficit of 4.06%.

Airlangga stated that maintaining a 3% deficit under these scenarios would be difficult without cutting expenditure or reducing growth.