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Indonesia’s finance minister has ordered ministries and government agencies to cut their remaining travel budgets by 30% and freeze non-essential spending for the rest of 2026, according to a circular reviewed by Reuters. The measures are intended to keep the annual budget deficit below the legal ceiling of 3% of gross domestic product.
The circular, signed by Finance Minister Suahasil Nazara on Thursday, October 8, also tells civil servants to prioritize online meetings and halt procurement of new vehicles, as well as construction or renovation of official residences and buildings. Two sources familiar with the matter confirmed the directive to Reuters; the Finance Ministry did not immediately respond to a request for confirmation.
The order comes as the government’s latest estimate puts the 2026 deficit at 2.85% of GDP, compared with the original budget target of 2.68%. Agencies have until October 16 to submit proposed cuts to the ministry, but the letter says reductions must not disrupt public services or divert the overall budget from President Prabowo Subianto’s priority programs.
Spending restraint as the deficit nears its legal cap
Indonesia’s 3% deficit ceiling gives the directive particular significance: the government’s latest estimate leaves a relatively narrow gap between the projected deficit and the legal limit. The ceiling was introduced in 2003, after the Asian financial crisis of the late 1990s, which hit Indonesia hard and helped shape the country’s emphasis on fiscal discipline.
The 2.85% estimate is also above the 2.68% deficit target set in the 2026 budget. The Finance Ministry’s published budget material set the planned deficit at 2.68% of GDP, while the higher figure cited by Reuters reflects the government’s later estimate for the year. The two numbers describe different stages of the budget outlook, rather than competing accounts of the original target.
Prabowo took office in 2024 after campaigning on costly spending commitments. Investors have questioned whether the administration can advance its programs while maintaining the deficit limit, according to Reuters. Suahasil, appointed finance minister last month as Prabowo’s third holder of the post in less than two years, has pledged to respect the fiscal limits.
Agencies must submit proposals by October 16
The circular sets a near-term task for every government agency: submit its proposed budget reductions to the Finance Ministry no later than October 16. It identifies travel and non-essential spending as targets, while also directing agencies to use online meetings and stop specified vehicle and building-related spending.
The instruction does not provide a total savings target or set out the amount each ministry must cut. Nor does the Reuters report specify how the ministry will assess proposals, or whether additional reductions will follow after agencies submit them. The circular’s stated guardrails are to protect public services and keep spending focused on presidential priorities.
Those limits may shape which expenses agencies can readily reduce, but the available reporting does not identify individual programs or ministries facing cuts. The measures are therefore a spending-control order, not a reported change to the government’s core programs or an announced revision to the deficit ceiling.
Energy costs add pressure to the budget outlook
The spending directive arrives as higher global energy prices threaten to increase Indonesia’s subsidy bill in the final quarter of 2026. Reuters reported that rising subsidy payments are complicating the government’s effort to manage limited fiscal room, adding pressure as it seeks to keep the deficit below the statutory cap.
The latest measures follow an earlier round of fiscal restraint. Last year, Prabowo reduced spending plans by $19 billion to keep the deficit within the ceiling. The government nevertheless ended that year with a deficit of 2.81% of GDP, the highest in more than two decades outside the pandemic years, according to the Reuters report.
Those previous cuts also had local consequences: regional governments raised local taxes, prompting protests in several provinces, Reuters reported. The new circular focuses on central government agencies’ remaining budgets, and the reporting does not indicate whether local governments will face comparable measures this time.
What happens next
The next specified step is the October 16 submission deadline, when agencies must send their cut proposals to the Finance Ministry. The circular does not announce a date for a consolidated review, a revised deficit forecast or a further public statement on the expected savings.
Whether the reductions will be sufficient to offset higher energy-related costs remains unclear. The Finance Ministry had not immediately confirmed the directive, and the government’s latest 2.85% estimate leaves the deficit close to the 3% limit. The proposals and any later budget update will show how the administration plans to balance its spending priorities against that constraint.
