Speaking at the Indonesia Fiscal Forum (IFF) 2026 in Jakarta, Sadewa said the decision was not an easy one, but necessary to maintain the momentum of national economic growth amid mounting slowdown pressures.
“From the government side, spending and other measures, I ensure that everything is aimed at turning the economy around. As a result, the fiscal impact is a wider deficit. But this is a step that must be taken. If not, we could end up like in 1998 again,” he stated.
Preliminary data for the 2025 State Budget (APBN) shows a deficit of Rp695.1 trillion (about US$41.4 billion), equivalent to 2.92 percent of gross domestic product (GDP), wider than the initial target of 2.53 percent and close to the limit of 3 percent stipulated by law.
Meanwhile, the 2026 state budget has been agreed with a deficit target of 2.68 percent of GDP.
Despite criticism from various quarters over the government’s move, Sadewa explained that technically the government could have kept the deficit around 2 percent, but doing so would have required cutting several state spending items.
With Indonesia facing an economic slowdown, he opted to implement counter-cyclical policies by increasing government spending, including through social assistance programs and tax incentives. The policy is expected to help drive stronger economic growth.
“If we tighten fiscal policy, the economy will fall further. If we raise taxes, it will fall even more. That’s why I have never raised tax rates or customs duties. Instead, I make sure existing strategies are implemented and we try our best,” said the minister.
“That is the cost we have to pay to reverse the direction of the economy. But the most important thing is that we continue to safeguard fiscal sustainability,” Sadewa added.
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Translator: Bayu Saputra, Kuntum Khaira
Editor: M Razi Rahman
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