Indonesia to Cut Government Spending to Stabilize Budget Amid Global Economic Uncertainty

Jakarta – Indonesian Finance Minister Purbaya Yudhi Sadewa announced plans to curtail budgetary allocations across government ministries and institutions (K/L) on Saturday, citing global economic volatility stemming from tensions in the Middle East. The move aims to safeguard the state budget (APBN) against external shocks.

Minister Sadewa assured that the efficiency measures would be implemented in a manner that avoids disruption to the national economy. “Essentially, we will be cutting budgets,” he stated following Eid al-Fitr prayers at the Directorate General of Taxes mosque in Jakarta. “I will limit novel budget requests. If ministers continue to submit them, we will cut them. We will adjust others, but it won’t impact the economy.”

The Minister indicated an initial proposal to request each K/L to independently reduce their budgets by 10%. But, he has shifted strategy, opting instead to directly implement cuts and allow ministries to adjust accordingly. “We are currently calculating everything, all ministries,” Sadewa explained. “Initially, we suggested they propose 10% efficiency measures. But when I offered that to them, they weren’t cutting, they were continuously adding. So, I said I would make the cuts and they can adjust. We are still discussing the percentages.”

Sadewa emphasized the importance of ensuring timely government spending on essential projects whereas maintaining liquidity within the economic system, a process he monitors daily within the Ministry of Finance. He added that the efficiency drive will target programs with limited impact or slow progress towards national economic growth. “Various things. Unclear meetings, or policies with slow or minimal impact on economic growth, we can postpone,” he said.

The government is currently pursuing a Rp 442.5 trillion (approximately $27.6 billion USD) revenue target for 2025, according to recent reports. Meanwhile, the 2026 state budget is currently considered secure, with no revisions anticipated despite oil prices remaining below target levels, investor.id reported Saturday.

The Minister’s announcement comes amid growing concerns about the potential for broader economic instability due to escalating tensions in the Middle East, as highlighted by the Indonesian House of Representatives, which has urged fiscal resilience.

Separately, Minister Sadewa indicated openness to potential cuts in ministerial salaries, stating, “That’s good,” when asked about the possibility.