Prabowo Says Deficit Cap Will Hold Unless Oil Crisis Deepens
President signals limited flexibility if global oil prices surge above US$120
Indonesia will only consider temporarily exceeding its fiscal deficit cap if oil prices remain extremely high due to the escalating Middle East conflict, President Prabowo Subianto has said.
Deficit Cap Remains Core Policy
President Prabowo Subianto said Indonesia has no plans to revise its legally mandated fiscal deficit ceiling of 3 per cent of gross domestic product.
He noted that the government would only consider exceeding the limit in a major emergency situation similar to the Covid-19 pandemic.
Oil Price Surge Could Pressure Budget
The president warned that prolonged spikes in oil prices could challenge the country’s fiscal stability.
Prabowo said maintaining current fuel prices would become very difficult if global oil prices rise above US$120 per barrel for an extended period.
Gradual End to Fuel Subsidies
Indonesia plans to gradually eliminate costly fuel subsidies within the next three years.
The government intends to replace them with expanded renewable energy investments, including plans to develop 100 gigawatts of solar power capacity.
Free Meals Programme to Continue
Prabowo also reaffirmed his commitment to the government’s free meals programme, one of his flagship initiatives.
The programme currently accounts for around 11 per cent of Indonesia’s central government budget and is seen by the administration as a stimulus for economic growth.
Additional Taxes Under Consideration
Officials have also indicated that the government may introduce additional taxes on commodities such as palm oil if necessary.
The measure could help offset fiscal pressure caused by rising energy costs.
Indonesia’s fiscal strategy remains anchored by the 3 per cent deficit rule, but policymakers acknowledge that prolonged global energy shocks could force temporary adjustments as the government balances economic stability with social spending priorities.
Sources: Malay Mail (2026) , Bloomberg (2026)
Keywords: Indonesia Budget Deficit Cap, Prabowo Fiscal Policy, Oil Price Impact Indonesia Economy, Indonesia Fuel Subsidy Reform, Indonesia Economic Strategy