The adjustments reflect mounting operational demands that forced the government to widen its fiscal deficit targets while defending short-term economic stability.
Unprecedented Disasters and Energy Subsidies Drive Spending Upwards
Financial authorities pointed to sudden natural calamities as a primary driver behind the expanded spending plan.
There are unprecedented events that we never imagined. We never planned for them, and we never budgeted for what is called a natural disaster. Natural disasters up to now, from the natural disasters in northern Sumatra to several other places, including the forest and land fires that we have to handle right now, have absorbed an additional budget of at least around Rp60 trillion on their own, Suahasil Nazara said
Beyond emergency relief, the state budget absorbed higher costs for energy subsidies and compensation packages. The government maintained these subsidies to buffer consumer prices against global energy shocks and keep domestic economic activity moving forward, noting that the January-through-September realization for subsidies and compensation had already reached 84.3 percent of its initial allocation, as reported by CNBC Indonesia.
Of course we want a more targeted subsidy policy. However, in the short term, we see that this is necessary to hold prices down so that economic activity can still run. Therefore, spending increased, Suahasil Nazara said
To prevent total spending from spiraling out of control, the Ministry of Finance shifted funds away from lower-priority posts.
Widening the Fiscal Deficit to 2.85 Percent of Gross Domestic Product
The combined effect of higher disaster spending, energy cushions, and revenue adjustments altered the final fiscal equation for the year.
Furthermore, InvestorTrust highlighted that government debt interest payments reached Rp 444,5 triliun. Revenue collection through September reached 74,2% of its target, rising 25,5% year-on-year, while total expenditures reached Rp 2.660,5 triliun, rising 19% compared to the same period in the previous year, keeping fiscal performance relatively on track according to financial reports.
In contrast to the broader cautious outlook, Go Parlement noted that Chief Economist BCA David Sumual argued that the government needs to prioritize the quality of spending so that its impact on the economy is stronger, noting that if program implementation is rushed, the government risks prioritizing budget absorption over the quality of work and the benefits produced.
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