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Prabowo team vows fiscal prudence amid World Bank, IMF concerns
A 2003 law stipulates that Indonesia's fiscal deficit must not exceed 3 percent of GDP in any fiscal year and that the government’s total debt must stay within 60 percent of GDP.
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Finance Minister Sri Mulyani (left), Coordinating Economic Minister Airlangga Hartarto (second left), Thomas Djiwandono (second right) and Budi Djiwandono (right) pose for a photo before a press briefing on the state budget at the Taxation Directorate General building in Jakarta on June 24, 2024. (TJP/Deni Ghifari)
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member of president-elect Prabowo Subianto’s transition team has said the incoming administration will maintain the country’s hard-earned reputation for fiscal prudence as it seeks to dispel concerns, raised by investors and international institutions, about future state spending.
Transition team member Thomas Djiwandono said the budget deficit and debt-to-GDP ratio would be kept within the current legal boundaries.
“We want to emphasize that the president elect is committed to the deficit target agreed to by the current government and the House of Representatives,” Thomas, Prabowo’s nephew, said at a press conference held with officials from the outgoing administration on Monday.
A 2003 law stipulates that the fiscal deficit must not exceed 3 percent of GDP in any fiscal year and that the government’s total debt must stay within 60 percent of GDP.
These restrictions are meant to ensure fiscal policy discipline to prevent a monetary crisis such as the 1997 Asian Financial Crisis.
Read also: Wider 2025 budget deficit seen as double-edged sword
Prabowo was reportedly planning to fund the programs he promised in his campaign by gradually increasing the debt-to-GDP ratio in the state budget from 39 percent to 50 percent by the end of his presidency, a claim that Thomas has denied.
