JAKARTA (Aug 14): Indonesian President Prabowo Subianto on Friday proposed to Parliament a US$230 billion budget for 2027 with a fiscal deficit at 2.4% of GDP, with plans to maximise benefits from resource earnings to boost growth to 6% next year.

In his annual budget speech to Parliament, Prabowo said the 2027 budget will remain expansive and will be focused on eight key programmes, which include achieving food and energy self-sufficiency, building domestic industrial sectors and education.

Prabowo, who pledged tighter control over the country's natural resources, also proposed a plan to create a commodity exchange for Indonesia's strategic commodities, aiming to launch operations on Jan 1, 2027.

It would follow a plan to monitor commodity exports through a company, Danantara Sumberdaya Indonesia.

"We want to develop an Indonesia reference price for Indonesia's main commodity exports," he said in a fiery speech, adding that Indonesia would prefer to keep minerals like nickel, tin, and coal in the ground if buyers do not agree with the price Indonesia sets.

"Indonesia must not forever remain a country where commodities are extracted while their prices and profits are determined elsewhere. We do not merely want to be a global producer of commodities; we must become a price-setter for global commodities."

Prabowo's economic agenda and fiscal policies have been under scrutiny from investors since he took office in October 2024, especially after an increase in the government's fuel subsidy budget this year following a spike in global crude prices, which raised questions about how his costly flagship programmes can be funded.

Prabowo's fiscal agenda has also been complicated by the depreciation of the rupiah and large outflows of capital triggered by concerns about Indonesia's fiscal health, the independence of its central bank, transparency issues in the equity market and his controversial policy to centralise commodity exports.

Prabowo proposed to spend 4,097.2 trillion rupiah (US$229.73 billion or RM939 billion) in 2027, up 3.9% from the projected spending level for this year. Revenues are expected to reach 3,426 trillion rupiah next year, up 6.8% from this year's estimate.

The proposed budget deficit is the smallest gap since 2024 and down from the 2.85% of GDP deficit projected for 2026. Indonesia's law limits the government's annual budget deficit to 3% of GDP.

The figures are based on assumptions that GDP would grow 6% in 2027, with the inflation rate expected at 2.5%, the rupiah exchange rate averaging at 17,500 per dollar and the 10-year bond yield averaging at 6.9%.

This year, the government's official GDP growth target is 5.4%, but Prabowo said in an earlier speech on Friday that he believes 6% growth can be reached this year.

Prabowo has set a target to bring economic growth up to 8% by 2029. Growth was 5.3% in the second quarter of this year.

Inflation in July stood at 2.88%, comfortably within the central bank's target range, thanks to the government's fuel subsidies.

Uploaded by Magessan Varatharaja