Government Formulates Efficiency Plan to Keep 2026 Budget Deficit Below 3 Per Cent

Jakarta — Finance Minister Purbaya Yudhi Sadewa stated that the government is formulating a budget efficiency plan across various ministries and agencies as part of efforts to maintain the 2026 state budget deficit below 3 per cent.

Recent reports have emerged regarding potential adjustments to the budget deficit threshold to address the impact of rising global oil prices resulting from tensions between Iran, the United States and Israel.

“If fuel prices continue to rise, the first measure is efficiency,” Purbaya told journalists at the Coordinating Ministry for Economic Affairs office in Jakarta on Monday.

Purbaya explained that budget efficiency will primarily target Additional Budget expenditure across government agencies. He noted that such additional budget allocations have caused the overall budget to balloon, making them a potential area for cuts.

“Any programmes with additional allocations, we will delay until it becomes possible. But clearly it is not possible now. So we are focusing on the budget that exists,” he added.

The State Treasurer stated that the Ministry of Finance will determine the initial steps that agencies can take to prepare their budget efficiency plans, a process expected to take approximately one week.

“But execution is not certain yet. If cuts are needed, which areas will be cut, roughly speaking. Later they will adjust their policies based on cuts determined by the Ministry of Finance,” Purbaya explained.

The Finance Minister also stated that cuts to agency budgets will not require a Presidential Instruction, unlike the expenditure efficiency measures implemented at the beginning of 2025, which were governed by Presidential Instruction Number 1 of 2025.

“There will be no instruction,” Purbaya said.

To date, the government has not planned to issue a Government Regulation in Lieu of Law to regulate an expansion of the 2026 budget deficit ceiling.

The decision on changes to the budget design will continue to monitor developments in global oil prices in the coming period.

“A regulation in lieu of law is not evident at this point, because the budget remains secure. If oil prices remain high and are sustained, then we will recalculate the budget conditions. But there will be no immediate regulation in lieu of law,” Purbaya said.