2027 State Budget Sets Rp4,106.26 Trillion in Spending and 6% Growth Target, Leaving Little Room for Error

Press Release

Bandung, September 30, 2026

As conveyed by Ir. Dzikri Firmansyah Hakam, S.T., Pg.Dip., M.Sc., Ph.D., Lecturer at the School of Business and Management, Institut Teknologi Bandung (SBM ITB) and Executive Director of the Institute for Energy, Economics and Finance (IEEF), in a discussion on the Kompas Bisnis program on Wednesday, September 30, 2026, the 2027 State Budget (APBN) passed by the House of Representatives (DPR) should be judged not only by its size, but by the quality of its spending. The budget sets state spending at Rp4,106.26 trillion against state revenue of Rp3,435.10 trillion, producing a deficit of Rp671.16 trillion, or 2.4% of gross domestic product (GDP), built on assumptions of 6% economic growth, 2.5% inflation, an exchange rate of Rp17,500 per US dollar, and an Indonesian Crude Price (ICP) of US$75 per barrel.

The Executive Director of IEEF assessed these targets as aggressive amid global uncertainty, noting that a weaker rupiah coinciding with higher energy prices would exert a double pressure on imports, subsidies, energy compensation, inflation, and fiscal space. A deficit below the 3% ceiling, in his view, does not automatically signal low risk, as fiscal credibility also rests on realistic assumptions, resilience to external shocks, financing costs, with the 10-year Government Securities (SBN) yield assumed at 6.9%, and the productive use of the deficit. “The target is quite aggressive and, in my view, even ambitious, because it leaves very little room for error,” he explained.

On the revenue side, the tax revenue target of Rp2,911.95 trillion may be attainable, but the IEEF Executive Director urged broadening the tax base rather than raising the tax burden on the middle class, formal workers, micro, small and medium enterprises (MSMEs), and already-compliant taxpayers, supported by data integration, stronger compliance, and risk-based supervision. Flexible fiscal space is also smaller than the headline figure, as much of the budget is already committed to education, interest payments, personnel spending, regional transfers of Rp735 trillion, subsidies, and social protection, calling for priority on programs with high marginal return. He further cautioned that workers losing formal jobs may shift into informal work and still be counted as employed, so success should be measured through formal job creation, real wages, labour productivity, the employment elasticity of growth, and social protection coverage. “We should not be trapped by the open unemployment rate. That figure can look good while the quality of jobs is actually declining,” he said.

Overall, the Executive Director of IEEF assessed that the success of the 2027 APBN will depend on spending productivity and targeting accuracy. Mistargeted subsidies, such as the 3 kg LPG subsidy, whether through inclusion error, where ineligible parties receive assistance, or exclusion error, where eligible households are left out, require better databases, beneficiary validation, transparency, and accurate distribution. Over the longer term, fiscal resilience calls for room to reprioritize spending when shocks occur, reduced dependence on oil imports, an accelerated energy transition, and wider use of local currency settlement to lessen reliance on the US dollar. “Fiscal leakage does not only mean money that is lost or misappropriated. Subsidies and social protection that miss their targets are also fiscal leakage,” he concluded.

Source: Kompas Bisnis, September 30, 2026 

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