Widening APBN Deficit Carries High Risk, Economists Warn of Mounting Debt Threat

JAKARTA — Proposals to widen the ceiling on Indonesia’s national budget deficit (APBN) are considered inappropriate amid global economic pressures, according to economists.

Awalil Rizky, an economist at Bright Institute, assessed that proposals for a deficit exceeding 3 percent of gross domestic product (GDP) carry significant risk. The proposal was previously presented by the Coordinating Minister for Economic Affairs Airlangga Hartarto to President Prabowo Subianto through plans to issue a Government Regulation in Lieu of Law (Perpu).

The government’s assessment identified several macroeconomic risks, including rising oil prices, rupiah currency weakness, economic slowdown, and potential increases in yields on government securities (SBN).

President Prabowo directed efficiency measures during a cabinet meeting on 13 March 2026 to contain the deficit. These measures include savings on fuel consumption and pushing for optimisation of government technology (GovTech) to reduce budget leakage. Long-term targets are aimed at achieving a balanced APBN.

The option to widen the deficit remains open, potentially occurring if oil prices remain elevated due to geopolitical conflicts in the Middle East. This situation has been compared to the COVID-19 pandemic period, when the government expanded the deficit for emergency needs.

Awalil noted that current conditions differ from the pandemic. “It is important to remember several significant differences between pandemic conditions (2020) and now. First, the pandemic was virtually unpredictable, whereas unstable geopolitical conditions have persisted for quite some time, although the conflict was surprising,” he stated in a press release on Tuesday (17 March 2026).

The debt-to-GDP ratio increased from 30.23 percent in 2019 to 40.46 percent in 2025. The debt service burden ratio relative to state revenue rose from 42.74 percent to 47.67 percent.