Government Opens Option for Budget Deficit Above 3 Percent; INDEF Economist Outlines Benefits and Drawbacks

JAKARTA — The Institute for Development of Economics and Finance (INDEF) has assessed that the government’s decision to open options for widening the state budget deficit above 3 percent carries both positive and negative effects.

Senior INDEF economist Didin S Damanhuri stated that if global uncertainty resulting from Middle Eastern conflicts continues to escalate, widening the fiscal deficit becomes unavoidable.

“So the option to widen the deficit—if all three war scenarios cannot be avoided—means the deficit will be above 3 percent,” he said during a virtual discussion on Saturday, 14 March 2026.

This measure is viewed as providing the government with space to continue implementing priority programmes such as the Free Nutritious Meals programme (MBG), Village and Sub-district Red and White Cooperatives (KDMP), and affordable housing amid global economic pressures.

These priority programmes require substantial budgetary support due to their wide coverage and national scale. Large appropriations will naturally strengthen the potential for fiscal deficits exceeding 3 percent.

“The positive effect is certainty that deficits exceeding 3 percent would be used to sustain the continuity of priority programmes already decided upon, such as MBG, KDMP, food and energy self-sufficiency, affordable housing and so forth,” Damanhuri said.

According to him, several priority programmes currently face problems regarding preparedness and field governance. Yet programmes with huge budgetary needs should possess substantial leverage on economic growth.

For instance, the KDMP programme, planned to build facilities in tens of thousands of villages, risks encountering problems if not accompanied by business training and cooperative institutional strengthening first.

Similarly, the free nutritious meals programme, implemented by the Nutrition Fulfilment Service Unit (SPPG) in each region, will have limited economic impact if raw material supplies do not come from local products and do not utilise nearby small and medium enterprises.

“So the positive effect can indeed occur. But the question is whether the implementation of these priority programmes follows the ideal scenario. The negative effect occurs if the priority programmes are not improved,” he concluded.