Indonesia lawmakers debate easing 3% fiscal deficit cap

  • Indonesia's parliament discussed revising the country's fiscal deficit and public-debt limits.
  • 3% of GDP and 60% of public debt are the current statutory ceilings.
  • Harris Turino said parliament was unlikely to finish the revision during the session ending in November.

Indonesia's parliament is considering revisions to the state finance law that could allow the government to exceed the 3% annual fiscal deficit cap and potentially revisit the 60% public-debt limit. The rules, followed by successive governments since 2003, were introduced after the Asian Financial Crisis and have supported investor confidence in Indonesia's fiscal prudence. Several lawmakers from President Prabowo Subianto's coalition backed discussing more flexibility, arguing that stricter limits could hinder welfare goals and the president's 8% economic growth target. Prabowo took office in October 2024 after making costly campaign promises, while his 2025 budget deficit was the widest in more than 20 years outside the pandemic. Economists told parliament that removing the limits would require alternative safeguards, including controls on debt-service ratios or interest payments relative to tax revenue. One proposal was to calculate an average deficit over five or 10 years. The deliberations remain at an early consultation stage, and lawmaker Harris Turino said parliament was unlikely to complete them during the current session, which runs until November.

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