Fitch Ratings outlook revision raises alarm over fiscal credibility
JAKARTA – Fitch Ratings has trimmed Indonesia’s outlook from stable to negative as of Wednesday, 4 March 2026. The downgrade places emphasis on the risk that fiscal credibility could erode amid widening deficits and rising debt service costs. Commission XI of the Indonesian House of Representatives, led by Marwan Jafar, urged the government to overhaul its economic policy to stave off potential capital outflows and an expanding debt service burden. He argued that the change in rating outlook is not merely a figure on paper, but an alert to Indonesia’s fiscal credibility in the eyes of the world.
In their assessment, Fitch projected that Indonesia’s 2026 budget deficit would reach 2.9% of GDP, exceeding the government’s target of 2.7%. The pressure is driven by a slowdown in state revenue alongside plans to escalate social spending, notably the Free Nutritious Meals Programme (MBG), which is estimated to absorb up to 1.3% of GDP.
Marwan warned that populist programmes should not come at the expense of fiscal discipline. “Strategic welfare programmes are important, but without sound fiscal planning, such programmes could become a burden that unsettles macroeconomic stability.” He emphasised that while welfare initiatives are vital, they must be underpinned by solid fiscal planning to avoid undermining national economic stability.
He warned that if the government fails to respond to Fitch’s negative signals, subsequent effects could soon be felt in financial markets, including heightened exchange-rate volatility and a pullback in foreign investment from the real sector.
Therefore, he called for stronger coordination between fiscal policy at the Ministry of Finance and monetary policy at Bank Indonesia in order to defend the credibility of the economy.
“Don’t wait until our rating actually falls. The government must provide certainty that every rupiah spent is measured and does not damage the health of the APBN,” Marwan concluded.
Separately, Fitch Ratings did indeed cut Indonesia’s outlook from stable to negative on 4 March 2026. The government chose not to raise个人 income tax (PPh 21) for employees despite IMF recommendations, a move aimed at preserving purchasing power and sustaining growth momentum.
Awalil Rizky of the Bright Institute noted concerns about the openness of national financial information. The APBN Kita 2025 release no longer provides monthly debt positions. The essence of debt management, however, lies not in the debt-to-GDP ratio itself but in how much debt can generate sustainable economic value.
As of the second quarter of 2025, or end-June 2025, government debt stood at Rp9,138.05 trillion, equal to 39.86% of GDP. The Centre for Constitutional Law Studies (Pushati) at Trisakti University’s Faculty of Law highlighted Government Regulation (PP) No. 28 of 2022 on the National Debt Affairs Committee.
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