Indonesia’s fiscal footing is becoming increasingly precarious. On July 3, 2025, Finance Minister Sri Mulyani Indrawati reported to Parliament that, as of June, the state budget (APBN) recorded a deficit of Rp197 trillion, or 0.81% of GDP. This marks a sharp deterioration from a mild Rp21.8 trillion deficit in May and a surplus just months earlier. The widening deficit is driven by a 9% year-on-year decline in revenue and a 7% increase in state spending.

This sharp fiscal reversal, while seemingly manageable in the short term, raises serious concerns about the long-term sustainability of Indonesia’s fiscal path. The current squeeze is colliding head-on with the Prabowo administration’s policy agenda, an agenda defined by expanding commitments that demand significant and sustained public financing. 

In this context, two fundamental questions arise. First, how will these programs be funded without jeopardizing fiscal stability or displacing existing priorities? Second, does the state have the capacity to implement them effectively?

Ambition that outpaces fiscal space and institutional readiness risks weakening implementation, eroding public credibility, and creating costly inefficiencies. Ultimately, this results in a growing disconnect between what is promised politically and what is administratively and fiscally deliverable.