Indonesia Maintains Fiscal Discipline Amidst Tax Challenges

Deficit Management Strategy

The Indonesian government is working to keep the 2025 budget deficit below the 3% GDP threshold, despite facing potential tax revenue shortfalls. Finance Minister Purbaya Yudhi Sadewa emphasized that the government will maintain fiscal discipline through expenditure control measures ¹

Budget Realignment and Expenditure Control

Several ministries and government agencies have returned unutilized budget allocations to the Ministry of Finance, with previous reports indicating returns totaling between Rp 3.5-4.5 trillion. This return of funds serves as a fiscal buffer to prevent excessive deficit expansion ⁴

Tax Revenue Projections

The tax shortfall is expected to widen, with the World Bank projecting Indonesia's tax ratio to decline to 9.4% of GDP in 2025 and 9.7% in 2026, down from 10.1% in 2024. Despite this, the government remains optimistic about maintaining the deficit target through careful fiscal management ⁵

Government Confidence in Deficit Target

Director General Febrio Nathan Kacaribu stated that the government is monitoring cash flows closely and is confident that the deficit will remain at 2.78% of GDP, within the safe limit. The government is implementing various measures in the remaining months of 2025 to optimize revenue and control expenditures ³