EN.malanginspirasi.com – The Indonesian government is making selective budget cuts across ministries and agencies (K/L) the cornerstone of its strategy to prevent the 2026 State Budget (APBN) deficit from ballooning due to global crude oil prices exceeding the assumed US$70 per barrel.
Instead of raising subsidized fuel prices or allowing the deficit to breach the 3 percent of GDP ceiling, authorities are prioritizing efficiency measures that safeguard flagship programs such as the Free Nutritious Meals (MBG) initiative.
Brent and WTI crude prices recently spiked to US$90–92 per barrel amid escalating Middle East tensions, putting the Rp210.06 trillion energy subsidy envelope in the 2026 APBN at risk of significant overrun.
Each US$1 rise in oil prices could add a net fiscal burden of Rp6.8 trillion. Without corrective action, the planned deficit of Rp689.14 trillion (2.68 percent of GDP) could expand to 3.6–3.7 percent.
Coordinating Minister for Economic Affairs Airlangga Hartarto reaffirmed the government’s resolve to maintain fiscal discipline in line with the State Finance Law.
“Priority and flagship government programs will remain untouched,” he stated after a coordination meeting at the Coordinating Ministry for Economic Affairs on Tuesday, 16 March 2026.
Budget trimming targets non-essential goods and services, including new civil servant (ASN) recruitment, official travel, inflated supplementary programs, and deferrable operational expenditures. The Finance Ministry has instructed all K/L to prepare detailed simulation scenarios since last week. The final decision rests with President Prabowo Subianto.
Protecting the Free Nutritious Meals (MBG) Program
The Rp335 trillion MBG program—the administration’s signature initiative—remains under close scrutiny. Finance Minister Purbaya Yudhi Sadewa clarified that cuts will only affect supporting components, not the core food distribution mechanism. “MBG is an excellent program, but we must prevent spending that does not directly support meal delivery,” Purbaya explained.
Head of the National Nutrition Agency Dadan Hindayana confirmed that, as of 8 March, no official reduction instructions had been issued.
“Operations continue normally. Only items such as motorcycles or computers for the School Nutrition Program (SPPG) that do not directly support food delivery may be trimmed,” he said.
President Prabowo has directed a review of work-from-home (WFH) arrangements for civil servants and nationwide fuel consumption savings to ease subsidy pressure. Higher revenues from coal and nickel exports are also expected to help offset part of the shortfall.
Finance Minister Purbaya guaranteed that subsidized fuel prices will not increase at least until the end of 2026 or, at the earliest, after Eid al-Fitr.
“The APBN remains robust enough to withstand pressure up to US$75 per barrel,” he asserted.
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The 2026 APBN has not been formally revised. The Finance Ministry aims to complete its savings calculations within the next week. Two scenarios are being prepared: if the Middle East conflict lasts less than five months, current cuts should keep the deficit below 3 percent; longer durations will trigger monthly evaluations.
Economic Outlook and Fiscal Credibility
The efficiency drive is expected to preserve Indonesia’s fiscal credibility and sovereign debt rating. Economists, however, warn of possible short-term growth slowdowns if infrastructure projects or ASN recruitment are affected. On the positive side, ordinary citizens are shielded from energy price hikes, although MBG implementation may see minor regional adjustments.
The government views an emergency Perppu to widen the deficit as an absolute last resort. President Prabowo has repeatedly emphasized his long-term vision of a “balanced budget,” positioning these measures as part of broader structural fiscal reform.
Developments will continue to hinge on global oil price movements. A joint monitoring team from the Finance Ministry, Coordinating Ministry for Economic Affairs, and Bank Indonesia remains on high alert.
