In a circular dated Oct. 8, the Finance Ministry directed agencies to carve back 30% from travel funds that remained unused as of that date. It also told them to defer purchases of new vehicles, hold off on spending for official housing and office renovations, favor virtual meetings, and curb non-essential travel.
According to Sudarto, who serves as the Finance Ministry's director general for the state budget, the steps aim to keep expenditures focused on development goals, protect public services, and help agencies meet their performance targets. The steps were outlined at a briefing that also featured Suahasil Nazara and Djaka Budi Utama.
Indonesia's deficit stood at 1.24% of GDP at the end of September, and the government says it expects to land near a full-year gap of around 2.8% of GDP while keeping below the legal ceiling of 3%. Energy-related outlays climbed to 377 trillion rupiah, or $21.1 billion, by late September, up by more than half from the same stretch last year.
The surge stems from higher oil prices, increased domestic consumption of subsidized fuel and LPG, and the shift to paying subsidies every month. Suahasil said Indonesia's current average realized crude price is $92 a barrel and is expected to increase further, already well above the $70 set in the budget. "And if it rises, then subsidies will also increase," he said. "All of this has a direct impact on the state budget, and we must certainly absorb these costs and ensure that payments are made."
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Jakarta is funding initiatives such as free meals and village cooperatives while also speeding up tax refunds to businesses that need cash flow, especially labor-intensive industries and smaller firms, according to Suahasil. Because refunds will be issued earlier, faster reimbursements should temper collections from domestic value-added tax.
On the revenue front, Indonesia intends to introduce a tax on sugar-sweetened beverages during the second half of 2027, aiming to raise 1.7 trillion rupiah, Djaka Budi Utama said. The rate and technical setup are still under discussion.
The playbook here is clear: trim discretionary travel, delay some capital outlays, support business cash flow, and cover rising subsidy bills while staying under the deficit cap. Keep an eye on companies tied to government travel and procurement, sectors benefiting from faster VAT refunds, and industries sensitive to energy subsidies, since cash timing and demand can shift as these policies bite.
Where cuts land says more than any spending announcement. Get the free Market Briefs daily newsletter and follow it.
