Purbaya Sets a Deficit-Reduction Path Amid Rising Debt
As Indonesia’s public debt nears a sizable threshold, Finance Minister Purbaya Yudhi Sadewa has outlined a strategy focused on targeted spending and revenue enhancement to reduce the budget deficit and stabilize the nation’s fiscal health. The debt figure, reported as Rp9,138.05 trillion by the end of the first half of 2025, places the government at a crossroads: maintain growth while ensuring debt remains within safe, manageable bounds.
Targeted Spending: Spending Wisely to Boost Growth
At the Ministry of Finance, Minister Purbaya emphasized that the first pillar of the plan is prudent, timely, and targeted spending with minimal leakage. He argued that optimizing the budget’s impact on the economy would accelerate growth, which in turn would lift state revenues. “The first strategy is to spend the budget, targeted and on time, with no leakage, to optimize the budget impact on the economy,” he stated on Monday, October 27, 2025.
Improved growth is expected to lift tax and customs revenue as a byproduct. Purbaya believes that a healthier real sector will translate into higher tax uptake and an improved tax ratio, contributing to deficit reduction without abrupt spending cuts that could derail growth. The approach hinges on ensuring public funds reach productive avenues—investments, infrastructure, education, and essential services—while avoiding inefficiencies.
The Real Sector as a Multiplier for Revenue
The minister underscored that tax revenue could rise if the real sector expands. He cited the potential impact of stronger growth on CoreTax and other revenue streams, suggesting that even modest gains in the tax ratio could accumulate into meaningful fiscal relief. He projected that a real sector uptick, coupled with at least Rp100 trillion in additional state revenue, could significantly shrink the deficit.
Tax Reform and Revenue Enhancement
Beyond spending controls, the strategy includes sharpening revenue collection. Purbaya highlighted efforts to improve revenue sectors such as customs duties, taxes, and other core tax instruments. He expressed optimism that the tax ratio could improve by half to one percentage point with improvements in the real economy.
Strategic reforms aim to reduce obstacles to growth and streamline processes so that government revenue grows in tandem with economic expansion. The finance ministry’s plan is to keep the debt burden within moderate bounds while supporting macroeconomic stability and sustainable growth.
Debt Context: A Moderate Position in a Global Perspective
Suminto, Director General of Financing and Risk Management (DJPPR), noted that the central government’s debt level at mid-2025 stood at Rp9,138.05 trillion, or about 39.86% of GDP. He described this ratio as healthy and manageable, especially when viewed against international comparators. “This is quite low and moderate compared to many other countries,” Suminto said during a media briefing in Bogor, West Java, on October 10, 2025.
The government’s stance is that debt management should not only pursue growth but also resilience—ensuring financing remains affordable and flexible in the face of external shocks. The balance, according to officials, lies in nurturing a thriving real sector while maintaining tight controls on spending and broad-based revenue expansion.
Outlook: Growth, Revenue, and a Responsible Deficit Path
With a focus on targeted spending, revenue enhancement, and a healthier real economy, Indonesia aims to accelerate growth beyond 5% when feasible. Purbaya’s optimism about faster quarterly growth reflects a deliberate bet that a stronger economy will lift tax collections and reduce the deficit, even as debt remains moderate by international standards.
As the year progresses, observers will be watching how well the strategy translates into measurable improvements in the deficit, revenue ratios, and the broader trust in Indonesia’s fiscal stewardship. The coming quarters will test whether the combination of disciplined expenditure and smarter revenue collection can deliver sustained fiscal balance without compromising growth.
