JAKARTA (Sept 24): The Indonesian parliament's budget committee on Thursday approved total government spending of 4,106.3 trillion rupiah (US$231 billion or RM941.5 billion) in the 2027 budget, with the fiscal deficit forecast at 2.40% of GDP, the committee chair said.

The committee also approved a state revenue target of 3,435.1 trillion rupiah, chair Said Abdullah said.

Both spending and revenue were 9.1 trillion rupiah higher than the initial budget proposal presented to parliament by President Prabowo Subianto in August.

The higher spending was due to an increase in allocations for ministries and agencies, the committee chair said, with the revenue target raised by the same amount to keep the fiscal deficit unchanged.

Investors have been closely watching Prabowo's spending plans amid concerns about their impact on fiscal discipline and debt levels.

The budget worries have been one of the factors weighing on the rupiah this year, which hit a record low against the dollar in June. The rise of global oil prices in recent weeks has added to concerns about the fiscal outlook, renewing pressure on the currency.

The forecast cost of energy subsidies in the approved budget was lowered by 11 trillion rupiah from the initial proposal to 261.5 trillion rupiah, or just over 6% of total spending, because of improvements in fuel distribution.

In other changes from the initial proposal, spending for defence has increased by 6 trillion rupiah to 335 trillion rupiah, around 8% of total spending, and thecentral government's education spending has increased by 14 trillion rupiah to 497 trillion rupiah, around 12% of total spending.

At 2.4% of GDP, the forecast deficit is lower than the 2.85% gap expected for this year. Indonesia has a legislated deficit ceiling set at 3% of GDP.

The budget has planned net bond issuance of 834 trillion rupiah, some 54 trillion rupiah higher than the initial proposal.

The committee's decision is expected to receive approval in a broader parliamentary vote on September 29.

Most economic assumptions for 2027 remained unchanged, with GDP growth targeted at 6%, inflation projected at 2.5%, and the rupiah assumed to average 17,500 per US dollar, the committee chair said.

The projection for Indonesia's crude oil output was raised slightly, which partly explained the higher revenue target.

Prabowo plans to boost revenue through greater proceeds from Indonesia's natural resources, supported by a planned commodity exchange to set prices and a new state export firm that will monitor key shipments.

The 6% growth target tracks this year's goal, though some analysts said a growth rate of around 5% is more likely in 2026 given weaker spending and soft external demand.

A draft bill accompanying the budget included a plan to charge an excise tax on sugary drinks. Finance Minister Suahasil Nazara, speaking to reporters after a hearing with the committee, declined to provide details.

Suahasil was appointed as finance minister last week, after serving as deputy minister since 2019.

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