Fitch Cuts Indonesia's Debt Outlook, Flags Deficit Ceiling and Debt Servicing

Jakarta, CNBC Indonesia — Global credit rating agency Fitch Ratings has cut Indonesia’s debt outlook from stable to negative on Wednesday, 4 March 2026. While lowering the outlook, Fitch retains Indonesia’s BBB rating as investment grade.

In its note, Fitch said the revision of Indonesia’s debt rating outlook reflects heightened policy uncertainty and concerns about the erosion of the consistency and credibility of Indonesia’s policy mix amid rising centralisation of policy‑making authority.

‘The increased risk is illustrated by including a review of the State Finance Law in its 2026 legislative priorities,’ Fitch wrote in its report.

Fitch warned that revising the State Finance Law could loosen the long-standing fiscal framework, including the 3% deficit ceiling. ‘It could undermine policy credibility and the ability to finance a higher fiscal deficit without support from the central bank,’ Fitch said.

Fitch also projects further pressure. It forecasts a fiscal deficit of 2.9% of GDP in 2026, unchanged from 2025 and above the government’s 2.7% target. This is driven by still-moderate government revenue.

‘This reflects our more conservative revenue assumptions, based on slower growth projections and the modest near-term impact of steps to improve tax compliance,’ it said.

Additionally, on the revenue side, efforts to boost growth and ease social tensions that linger after last year’s protests will drive higher social spending, including free nutritious meals programmes. ‘Plans to prioritise expenditure in the first half of 2026 could add to the risk of a fiscal deficit,’ Fitch said.

Moreover, Fitch projects general government debt to rise slightly to 41% of GDP in 2026, below the BBB rating’s median projection of 57.3%. ‘We expect the debt ratio to remain broadly stable in the medium term, reflecting our current assumption that the government will adhere to the fiscal deficit cap,’ Fitch said.

Nevertheless, Fitch notes that interest payments are projected to reach about 17% of government revenue in 2025, including the highest among BBB-rated peers.