By Gayatri Suroyo
JAKARTA, Feb 23 (Reuters) – Indonesia reported a 54.6 trillion rupiah ($3.25 billion) budget deficit in January, or 0.21% of its gross domestic product, with spending jumping 26% from a year earlier due to the costs of President Prabowo Subianto’s free meals programme.
The government of Southeast Asia’s biggest economy spent 227.3 trillion rupiah in January, up 25.7% from the same month of last year.
This outpaced the 20.5% growth in total revenues, which reached 172.7 trillion rupiah, reflecting a fall in tax refunds and matching data released earlier this month.
The monthly deficit was much larger than the 0.09% recorded in January last year.
Investors are watching the government’s fiscal position closely after a turbulent start to 2026 in Indonesia’s financial markets, triggered by concerns about the country’s fiscal health, the independence of its central bank and the transparency of its stock exchange.
Prabowo’s ambitious free meals programme cost the government 19.5 trillion rupiah in January, surging from 45.2 billion rupiah in January 2025, when the programme was just starting, said deputy finance minister Suahasil Nazara.
The programme, aimed at providing free lunch to students and pregnant women, had reached 60.24 million recipients as of February 21, Suahasil said, compared with under 550,000 recipients at the end of January 2025. It is designed to reach 83 million recipients when fully implemented.
“Spending on the social aid programme doubled… This will contribute to growth, especially in household consumption,” Suahasil said. Social spending reached a total of 9.5 trillion rupiah in January.
The government aims to expedite spending in the first quarter to reach 809 trillion rupiah, up by about 30% from the same period of 2025, in a bid to provide more momentum for economic growth, Minister Purbaya Yudhi Sadewa said.
First-quarter spending on free meals is estimated to reach 62 trillion rupiah, while another 15 trillion rupiah will be used for food handouts and other fiscal stimulus measures.
Purbaya said government spending will further drive economic growth, which could reach between 5.5% to 6% in the first quarter. Growth was 5.39% in the fourth quarter of 2025, already the highest in three years.
While the January numbers are not sufficient to assess the health of the full-year budget, the government needs to match the faster spending with consistent revenue growth, said Bank Permata economist Josua Pardede.
He predicted a fiscal deficit for this year of around 2.93% of GDP with the risk of sluggish revenue, close to the legal limit of 3% of GDP. The government targeted a deficit of 2.68% of GDP.
“The projected deficit of around 2.93% of GDP is a reminder that the margin of safety remains, but it will be slim if spending continues to accelerate without sustained revenue improvements,” Pardede said.
FITCH VISIT
Earlier this month, rating agency Moody’s cut Indonesia’s bond-rating outlook to “negative”, citing reduced predictability in policymaking, and investors are paying close attention to the assessments of two other major rating agencies, Fitch and S&P.
Fitch Ratings is due to meet several Indonesian institutions this week as it prepares its sovereign rating assessment, said Febrio Kacaribu, head of the finance ministry’s fiscal policy office.
He said the data released by the ministry on Monday should alleviate any potential worry.
“We see that what we have just presented will be very good in reflecting the very solid side of Indonesia’s real economic activity, and the state budget is also very good,” Febrio said.
($1 = 16,800 rupiah)
(Reporting by Gayatri Suroyo, Ananda Teresia, Fransiska Nangoy; Editing by John Mair, David Stanway and Thomas Derpinghaus)
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