Indonesia is prepared to adjust budget expenditures to maintain its fiscal deficit below 3 percent of GDP, as the conflict in the Middle East threatens to drive up oil prices and strain the economy. Finance Minister Purbaya Yudhi Sadewa stated that if global oil prices reach up to $90 per barrel, the deficit could widen to approximately 3.6 percent of GDP without expenditure adjustments.
The 2026 budget had assumed a domestic crude oil price of $70 per barrel. To mitigate the impact, the ministry plans to cut expenditures that have the least economic effect. Quarter of Indonesia's crude oil and 30 percent of its LPG imports originate from the Middle East. The country plans to increase crude oil imports from the United States and explore sourcing LPG from outside the region to ensure supply certainty. Two Pertamina vessels are reportedly stuck in the Strait of Hormuz, with diplomatic efforts underway for their release.
Additionally, expenditure on Indonesia's free meals program may be scaled back, potentially saving approximately 100 trillion rupiah ($6 billion). This program has raised investor concerns regarding fiscal discipline. Minister Purbaya expressed confidence in achieving President Prabowo's 8 percent GDP growth target while maintaining the fiscal deficit below the 3 percent ceiling, asserting that fears of exceeding the limit are misplaced.