Prabowo on Expanding Budget Deficit: Last Resort Option
President Prabowo Subianto has stated that the option to relax the state budget deficit ceiling in the short term is possible if global crude oil prices surge sharply over an extended period due to escalating conflict in the Middle East region. However, the head of state emphasised that widening the deficit remains a last resort option.
Prabowo said his administration has no plans to increase the deficit beyond 3 per cent. He stressed that the 3 per cent budget deficit limit as a proportion of gross domestic product (GDP) will only be changed if a severe crisis emerges.
“I hope we do not need to change it. Actually, I do not believe in deficits. Perhaps I am old-fashioned,” Prabowo said in a special interview with international media Bloomberg, in Hambalang, West Java, as cited by the Indonesian Government Communications Authority.
The possibility of a wider budget deficit emerged after Coordinating Minister of Economic Affairs Airlangga Hartarto revealed scenarios involving deficit implications from conflict between the United States-Israel and Iran.
Presenting to President Prabowo during a full cabinet session on Friday, 13 March 2026, Airlangga outlined three worst-case scenarios for the state budget deficit. According to his calculations, under war conditions, the state budget could face a deficit of between 3.18 per cent and 4.06 per cent of GDP.
President Prabowo emphasised his administration’s commitment to maintaining fiscal discipline, except in cases of major crisis. Prabowo referred to the deficit ceiling as an important instrument for maintaining discipline in state financial management.
“The deficit limit is a good tool to discipline ourselves. We have no plan to change it unless there is a very large emergency situation like Covid-19,” said Prabowo.
In the interview, Prabowo also openly rejected economic thinking that advocates achieving high growth through large borrowing. Prabowo stated that since childhood, his parents taught him to believe that spending must be adjusted to capacity.
“Do not spend more than what we produce,” he said. “That is a basic principle of life to be able to survive,” he continued.
Indonesia has maintained a maximum budget deficit ceiling of 3 per cent of GDP since the early 2000s, following the Asian financial crisis. This provision has been claimed as one of the pillars of fiscal discipline that investors monitor.
Prabowo reiterated his commitment to maintaining the deficit ceiling, even though many other countries have abandoned strict budget deficit targets. He noted that Indonesia previously wanted to emulate European Union rules that capped fiscal deficit at a maximum of 3 per cent of GDP. However, many countries in that region no longer comply with the rule.
The Gerindra party chairman believes Indonesia is more fortunate than other countries, as it has natural resources such as palm oil and coal that remain relatively inexpensive and can guarantee national resilience.
At the same time, the government will continue developing geothermal, solar, hydroelectric, and biofuel as alternative energy sources. “If we can get through this, in two years we will be very efficient,” said Prabowo. “We will be very, very independent from external sources.”