Understanding recent shifts in Indonesia’s fiscal policy is key to grasping how the nation navigates economic challenges and opportunities in 2025.

Revenue Decline Due to Weaker Tax Collections

Recently, Indonesia’s Ministry of Finance held a briefing revealing key insights into the 2025 state budget (APBN). A primary concern is the sharp drop in revenue, mainly caused by softer tax income. As of May 2025, the government’s revenue reached only 33% of the target—down from 40% in the same period last year.

According to Deputy Minister of Finance Sri Mulyani, the decline is attributed mostly to tax restitution issues. Despite this, gross tax revenue remains flat YoY, with new Director-General of Taxes Bimo Wijayanto taking the helm to revitalize collection efforts.

Increased Government Spending & Stimulus Efforts

Meanwhile, Indonesia’s government has begun ramping up expenditures again. In May, spending increased, reflecting the execution of reallocations within the APBN. Overall, spending for the first five months of 2025 is around -11% YoY, totaling approximately 28% of the budget target—lower than 34% last year.

This cautious increase aligns with initiatives launched by President Prabowo Subianto, who has directed efficiency measures since January 2025. Additionally, a stimulus package worth approximately Rp24.4 trillion ($1.6 billion) is expected to further boost spending in June and July, supporting economic growth.

Budget Balance & Fiscal Outlook

Despite these shifts, the government’s financing remains resilient. The combined revenue and expenditure generate a deficit of Rp21 trillion (about 0.09% of GDP), significantly below the targeted 2.53%. This indicates disciplined fiscal management, even amid economic headwinds.

Tax Policy Changes & Future Outlook

The government has deferred implementing the tax on sweetened beverages (MBDK) for this year, with the Director-General of Customs and Excise Djaka Budi Utama explaining that this policy will be revisited later. Initially, Rp3.8 trillion ($253 million) was targeted from this tax in the 2025 budget, but plans are currently on hold.

Overall, Indonesia is balancing revenue shortfalls with strategic spending and policy adjustments. The coming months will be crucial to see how efforts to stimulate growth and reform taxation unfold in this dynamic economic landscape.

Stay updated on Indonesia’s fiscal policies and economic developments to understand their potential impact on investments and financial planning.