Indonesia’s New Finance Chief May Recast Predecessor’s 2026 Budget

Indonesia Cuts Rate as Loan Growth Hits Three-Year Low

INDONESIA: Indonesia’s newly appointed Finance Minister, Purbaya Yudhi Sadewa, has announced plans to review his predecessor’s draft 2026 budget, including a potential revision of the fiscal deficit target, as part of his commitment to President Prabowo Subianto’s pro-growth agenda. Barely days into his role following the ouster of veteran Sri Mulyani Indrawati, Purbaya said the finance ministry will revise next year’s spending plans to increase allocations to regional governments after local leaders expressed concern over proposed cuts. When asked if the fiscal deficit target would be altered, he said it “may be changed, may be not. Can be higher, can be lower, we’ll see later.” 

Purbaya’s assertive start comes after he unveiled an unprecedented plan to inject roughly US$12 billion into state-owned lenders to spur credit growth, calling it a move to “rev up the monetary and fiscal engines.” The initiative, aimed at addressing a “drought” in Indonesia’s financial system, involves transferring half of the government’s 400 trillion rupiah (US$24 billion) in idle reserves held with the central bank to banks for lending. Economists see the measure as a bold attempt to accelerate economic activity, though some warn it could reduce fiscal flexibility. Purbaya, however, has assured that the funds will not be used for government debt purchases and will instead be directed toward loans to stimulate growth beyond 6%, in line with the president’s longer-term 8% target. 

Source: Bloomberg