[JAKARTA] Indonesia posted an unlikely budget deficit as of February due to a double-digit drop in state revenues, adding to concerns about the health of government finances this year.
The shortfall stood at 31.2 trillion rupiah (S$2.5 billion) in the first two months of 2025, equivalent to 0.13 per cent of gross domestic product, Finance Minister Sri Mulyani Indrawati said in a briefing on Thursday (Mar 13). That reverses the budget surplus of 0.11 per cent of GDP posted in the same period last year, according to Bloomberg-compiled data.
The last time Indonesia posted a budget deficit so early into the year was in 2021, when the government was ramping up spending to support the coronavirus-ravaged economy.
Indrawati said the shortfall “is still within our target designed for this year,” which remains at 2.5 per cent of GDP despite an ongoing budget review. Any changes to the outlook will be announced in the mid-year, she said.
Yields of five-year and 10-year government bonds rose two basis points and one basis point, respectively, after the announcement. The rupiah gained 0.1 per cent and stocks slipped 0.2 per cent.
State revenues suffered a 21 per cent annual decline as of February, dragged down by a 30 per cent dive in tax revenues, based on Bloomberg calculations of previously reported data. The ministry attributed the decline partly due to weaker commodity prices.
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This also comes after President Prabowo Subianto rolled back a value-added tax hike that was set for this year. Problems with a newly implemented tax administration system, known as Coretax, also made it difficult for taxpayers to pay their dues.
The budget briefing on Thursday was the finance ministry’s first for the year and was much awaited given an unusual delay. Indrawati acknowledged the long wait, saying there was “very unstable” data the ministry had to consider due to various factors.
Other than the last-minute move to scrap the VAT hike, Prabowo has also ordered his government to cut unnecessary projects and look for savings to be reallocated to his priority programs. As such, state expenditures as of February slumped 7 per cent year on year. Spending in ministries and agencies dropped by 30 per cent, while spending on social assistance and subsidies accelerated.
The finance ministry likewise confirmed that the budget for Prabowo’s free meals programmes – a signature campaign pledge – has been more than doubled to 171 trillion rupiah for this year to reach 83 million beneficiaries. As of mid-March, it has spent 710 billion rupiah for two million people. BLOOMBERG
