Government Still Has Sufficient Fiscal Space? Budget Committee Chief Reveals This

The head of the House of Representatives’ Budget Committee (Banggar DPR) RI, Said Abdullah, believes the government still has sufficient fiscal room to operate within a budget deficit of below 3% of GDP.

This statement responds to Finance Minister Purbaya Yudhi Sadewa’s opening of options to expand the State Revenue and Expenditure Budget (APBN) deficit for the 2026 fiscal year above 3% of GDP.

“To achieve fiscal discipline, there are certainly many ways,” said Said in a statement in Jakarta on Friday.

He cited various approaches including maintaining achievement of state revenue targets, improving taxation through a coretax system expected to enhance tax collection, and increasing export commodity prices such as crude oil and coal, which would boost Non-Tax State Revenue (PNBP).

On the expenditure side, he said, the government could implement efficiency measures by focusing on various non-priority programmes, an area where the government has experience.

According to him, if expenditure levels can be controlled and balanced with revenue realisation, the target deficit below 3% can be maintained.

Additionally, Said noted that the government must also maintain financing targets to manage them properly. Amid negative credit rating pressures, he continued, it is not easy to obtain financing through State Securities (SBN).

“The Finance Minister and his entire team must be able to convince foreign buyers to resume accepting SBN and expand SBN in the retail portion,” he said.

He stated that at the Budget Committee, there has been no initial discussion presented by the government regarding expanding the deficit beyond 3% of GDP or implementing quantitative easing policies.

If the government pursues a deficit policy exceeding 3% of GDP, Said noted there are both advantages and disadvantages. The advantage in the short term is wider fiscal space, but in the medium term it will shift current fiscal burdens to the future as deficit expansion is financed through debt.

He explained that similarly with quantitative easing policy, if using the Bank Indonesia (BI) model of absorbing SBN from the secondary market, then BI’s capacity must be considered, as the central bank has responsibility for controlling exchange rates and inflation.

He stated that these two responsibilities are not easy and require caution, as well as a strong mix of tools from BI.

“It must be calculated carefully, so that when BI absorbs SBN in the secondary market, it does not collapse in exchange rate and inflation control which is its primary duty. The risks must be calculated very carefully,” Said stated.

Likewise, he continued, with money printing, the risk of stagflation must be analysed clearly and cannot be done carelessly, as current conditions show the people’s purchasing power is not yet strong, so if more money circulates, stagflation could occur simultaneously.

The head of the Budget Committee also expected studies involving economists so that each economic policy receives adequate technocratic support, so that all risks can be mapped including their mitigation.

“What I want to emphasise is that our fiscal be healthy, stable and sustainable,” he said.