January 2026 Budget Deficit of IDR 54.6 Trillion Deemed a Measured Stimulus, Not a Sign of Crisis

The Executive Board of Projo believes that the state budget deficit of IDR 54.6 trillion as of January 31, 2026, is a legitimate fiscal policy instrument to encourage economic growth at the beginning of the year. Although nominally larger than the previous year, the figure is considered to still be within a safe limit.

Bonar Sianturi, Head of the Economy, Industry, and Investment Division of Projo’s Executive Board, explained that this deficit, equivalent to 0.21 percent of Gross Domestic Product (GDP), reflects the government’s strategy of implementing aggressive spending early on.

“This deficit is not a failure, but a policy tool. State spending reaching IDR 227.3 trillion shows that priority programs such as social assistance, subsidies, and transfers to regions are being implemented quickly so that their impact can be immediately felt by the community in the first quarter,” said Bonar in a statement on Wednesday (February 25, 2026).

Based on the realization data, state spending grew significantly by 25 percent, while state revenue was recorded at IDR 172.7 trillion with growth in the single-digit range. Bonar acknowledged the fiscal gap that has arisen due to the disparity in growth rates.

“The challenge is that our revenue structure still relies heavily on taxes and non-tax state revenue from commodities that are vulnerable to global price volatility. Therefore, tax reform and expanding the tax base are urgent agendas that need to be accelerated,” he said.

Although Indonesia’s fiscal position is considered healthy, Bonar gave critical comments regarding the quality of spending. Bonar emphasized that the deficit will be a future investment if it is directed towards productive sectors such as logistics infrastructure and improving human resources. However, risks will arise if the budget is only absorbed in short-term consumption programs.

From the financing side, the government is reminded to remain vigilant regarding the perception of the bond market. A surge in spending that is not accompanied by an acceleration in revenue could potentially increase debt and raise interest costs (yields).

“Investors will see the trend. If the need for government bonds increases sharply without efficiency, government interest costs could swell. Coordination between the government’s fiscal policy and Bank Indonesia’s monetary policy is crucial to maintaining the stability of the rupiah exchange rate,” said Bonar.

To maintain economic sustainability, Bonar offered four main recommendations to the government. First, control the pace of spending so that the deficit does not widen sharply in the second half of the year. Second, accelerate revenue reform through the digitalization of the tax system without aggressively raising tariffs.

Third, prudent debt management with diversification of funding sources. Finally, evaluate the quality of spending with transparent performance indicators for the public.

“This January deficit is a reflection of policy choices. This figure does not yet indicate danger, but it is a signal that we need to maintain a balance between the courage to spend and the wisdom to manage fiscal risks,” he concluded. (H-2)

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