Indonesia’s fiscal plans for 2026 are drawing both applause and skepticism, as President Prabowo Subianto’s administration unveils a bold budget packed with sweeping social programs and ambitious economic targets. Yet, as analysts pore over the numbers, questions abound: Can the country really achieve such rapid revenue growth and keep its deficit in check, all without new taxes?
On August 15, 2025, President Prabowo Subianto stood before parliament and outlined his first draft budget as Indonesia’s leader. He announced a gross domestic product (GDP) growth target of 5.4% for 2026, a figure that outpaces many international forecasts for emerging markets. The government’s spending is set to soar to 3.79 quadrillion rupiah (about US$233.92 billion), a 7.3% jump from the previous year. Meanwhile, total revenues are targeted at 3.147 quadrillion rupiah (around US$194.04 billion), nearly a 10% increase from 2025, according to figures reported by the South China Morning Post.
But it’s not just the size of the numbers that has observers talking. Prabowo’s administration aims to cap the budget deficit at around US$39 billion, or 2.48% of GDP—comfortably within Indonesia’s legal requirement to keep the deficit below 3% of GDP. "We will continue to implement efficiency measures so that we can minimise this deficit as much as possible," Prabowo told parliament on Friday, signaling that austerity measures would remain in place across ministries and other government institutions. He went further, expressing a long-term aspiration: "And it is my hope that one day, whether in 2027 or 2028, I want to stand before this assembly, at this podium, and declare that we have succeeded in having a state budget with no deficit whatsoever."
At the heart of Prabowo’s budget is a dramatic expansion of social spending, especially in programs designed to invest in Indonesia’s future. The centerpiece is a flagship free meals program, which aims to combat child stunting and malnutrition. The initiative will receive 335 trillion rupiah (US$20.6 billion)—nearly five times the allocation it received in 2025. The program’s reach is staggering, targeting over 82 million children, toddlers, and pregnant women. This move, the administration argues, reflects Prabowo’s campaign pledge to prioritize long-term human development, a promise that resonated with many voters during the last election.
Still, the numbers have prompted doubts among economists and fiscal analysts. On August 19, 2025, several analysts voiced concerns that Indonesia risks blowing past its budget deficit target for the coming year, citing Prabowo’s populist spending promises and the absence of any new tax measures. According to Bloomberg, the government’s plan to collect 3,148 trillion rupiah (about $194 billion) in state revenue in 2026 represents a 10% jump from the estimate for this year. More strikingly, it relies on a 13.5% increase in tax revenues.
Finance Minister Sri Mulyani Indrawati, speaking in mid-August, outlined how the government hopes to meet these ambitious targets. Rather than introducing new taxes, the strategy focuses on improving compliance and expanding the tax base—especially by drawing in the so-called shadow economy. "We are confident that with better compliance and a broader tax base, we can meet our revenue goals," she said, according to Bloomberg. However, many experts warn that such optimism may be misplaced, especially given the current global economic climate.
“The president’s growth, social spending and tax revenue targets are ambitious given the weak global economy,” economists told the South China Morning Post. Indeed, Indonesia, like many countries, faces headwinds from slowing global growth, persistent inflationary pressures, and ongoing geopolitical uncertainty. These factors could make it even more challenging to achieve the 5.4% GDP growth target, let alone the double-digit revenue increases baked into the budget.
Despite these concerns, Prabowo’s administration insists that its approach is both prudent and necessary. The president’s supporters argue that investing heavily in nutrition, education, and health for the country’s youngest citizens will pay dividends for decades to come. They point to the free meals program as a game-changer, not only in terms of public health but also as a foundation for stronger economic growth down the line. "If we can reduce child stunting and improve overall health, our workforce will be more productive, and our economy will benefit," said a senior government adviser, echoing the administration’s long-term vision.
On the other hand, critics worry that the government is betting too much on optimistic revenue projections and not enough on concrete policy changes. The lack of new tax measures is a particular sticking point. Indonesia’s tax-to-GDP ratio has long lagged behind many of its regional peers, and efforts to improve compliance, while laudable, may not yield results quickly enough to offset the rapid rise in spending. "Relying solely on better compliance and expanding the tax base is risky," noted one Jakarta-based economist. "Without new sources of revenue, there’s a real danger that the deficit will overshoot its target."
Adding to the uncertainty is the administration’s commitment to maintaining efficiency and austerity across government ministries—a tall order when social programs are expanding at such a rapid pace. Prabowo has promised to keep a close eye on spending, but as anyone familiar with large bureaucracies knows, cost overruns and inefficiencies can creep in quickly, especially when ambitious new programs are rolled out nationwide.
Yet, for many Indonesians, the promise of free meals for millions of children and pregnant women is more than just a budget line item—it’s a symbol of hope. The country has struggled with high rates of child stunting for years, and malnutrition remains a stubborn challenge in both rural and urban areas. By dramatically increasing funding for these programs, Prabowo’s government is signaling that it sees human development as the cornerstone of Indonesia’s future prosperity.
As the debate over the 2026 budget intensifies, all eyes will be on the government’s ability to deliver on its promises. Will improved tax compliance and a broader base be enough to fund a surge in social spending without ballooning the deficit? Or will the administration be forced to revisit its revenue strategies—and perhaps even consider new taxes—if the numbers don’t add up?
For now, the answers remain uncertain. What’s clear is that Prabowo’s first budget as president has set the stage for a high-stakes experiment in balancing populist ambitions with fiscal discipline. Whether Indonesia can pull it off will depend on a delicate dance between policy, politics, and the unpredictable tides of the global economy.
