Airlangga Outlines Potential Scenarios for Increased APBN Deficit Above 3%

Coordinating Minister for Economic Affairs Airlangga Hartarto has proposed that President Prabowo Subianto issue a government regulation in lieu of law (perppu) concerning the 2026 state budget. This comes as the APBN deficit is projected to exceed 3 per cent due to surging global crude oil prices resulting from geopolitical tensions in the Middle East.

Airlangga presented this proposal during a full cabinet session chaired by President Prabowo Subianto at the State Palace in Jakarta on Friday, 13 March 2026.

During the session, Airlangga outlined three scenarios for changes to assumptions regarding Indonesian crude oil prices (ICP), exchange rates (kurs), and economic growth arising from geopolitical tensions.

In the first scenario, with ICP at US$86 per barrel, the rupiah exchange rate at Rp17,000 per US dollar (compared to the APBN assumption of Rp16,500 per US dollar), economic growth maintained at 5.3 per cent, and state securities at 6.8 per cent, the APBN deficit is estimated at 3.18 per cent.

In the second scenario, with ICP at US$97 per barrel, the rupiah at Rp17,300 per US dollar, growth at 5.2 per cent, and state securities at a higher 7.2 per cent, the APBN deficit is projected to reach 3.53 per cent.

In the third scenario, with ICP at US$115 per barrel, the rupiah at Rp17,500 per US dollar, growth at 5.2 per cent, and state securities at 7.2 per cent, the APBN deficit breaches 4.06 per cent.

“With these various scenarios, maintaining a 3 per cent deficit is difficult unless we are willing to cut spending and reduce growth,” Airlangga stated.

Given the deficit’s potential to exceed 3 per cent, Airlangga said a perppu is necessary. With the perppu, cross-programme budgets can be modified without requiring parliamentary approval.

“With this regulation, the government immediately gains flexibility for changes. Energy transfer payments can continue, and emergency social assistance can be added through presidential regulation. State securities issuance can proceed, and we can utilise other financing mechanisms,” he explained.

However, Airlangga noted that the perppu issuance requires thorough deliberation. He also deferred the decision on issuing the perppu to Prabowo.

“The timing of the perppu we are preparing is ultimately a political decision for the President,” he said.

Airlangga noted that APBN perppu was previously issued during the Covid-19 pandemic. He explained that the perppu will regulate state revenues through emergency tax incentives for income tax and value-added tax in affected sectors without changing tax law. It will also include exemptions from import duties on certain raw materials to maintain export activity, and tax deferrals for small and medium enterprises and energy-intensive industries.