Fiscal Deficit at Risk of Widening, Economist: Impossible to Suppress Without Extraordinary Measures

JAKARTA, KOMPAS.com - The Center of Reform on Economics (CORE) Indonesia assesses that efforts to keep the fiscal deficit below 3 per cent cannot rely solely on efficiency in government spending. This is because the conflict in the Middle East could further widen the deficit. Executive Director of CORE Indonesia, Mohammad Faisal, stated that the widening of the deficit had already occurred even before the conflict between Iran, Israel, and the United States (US), thus limiting the room for fiscal control. The realisation of the State Revenue and Expenditure Budget (APBN) for January 2026 shows a deficit of Rp 54.6 trillion or 0.21 per cent of Gross Domestic Product (GDP). In nominal terms, this is the deepest January deficit in the last five years, even surpassing the position during the Covid-19 pandemic period. “So, the deficit is already much wider. The widening even happened before the war. Before the war, it was already wider,” he said in Jakarta on Monday (13/4/2026). He estimates that the deficit can still be kept below 3 per cent, precisely around 2.9 per cent of GDP. However, this target can only be achieved if the government implements a combination of policies or extraordinary measures in fiscal management. One option that needs to be pursued is to bring the deficit level closer to the maximum limit of 3 per cent without exceeding it. In addition, the government must also carry out refocusing or sharpening of spending to make the budget more effective and on target. On the other hand, Faisal also urges the government to optimise the potential for additional revenues or windfalls to help curb the widening deficit. “That’s why I told Mr President that ‘If it’s just efficiency alone, it’s not enough, sir’. Because the deficit has been wide from the start. But there must also be refocusing. Plus, we hope for windfall revenues,” he said. Regarding the plan to use excess budget balances (SAL) to plug the fiscal deficit, Faisal views this step as a follow-up option if the main policies are insufficient. However, he reminds that the current SAL capacity is not as large as in previous years, so it cannot be relied upon as the main solution. It is known that the Ministry of Finance has several times placed SAL in Himbara banks amounting to Rp 301 trillion to be channelled as credit or financing to various productive sectors.