Coordinating Minister for the Economy Airlangga Hartarto has proposed issuing a government regulation in lieu of law (Perppu) on the 2026 state budget to President Prabowo Subianto. The proposal arises from the potential for the APBN deficit to exceed 3 percent due to surging global oil prices amid the Middle East conflict. This was presented during a full cabinet plenary session at Istana Negara in Jakarta on March 13, 2026.
During the full cabinet plenary session led by President Prabowo Subianto at Istana Negara in Jakarta on Friday, March 13, 2026, Coordinating Minister Airlangga Hartarto outlined three scenarios for potential increases in the APBN deficit due to geopolitical tensions in West Asia, including a prolonged war between Iran, Israel, and the United States lasting up to 10 months.
The first scenario projects Indonesia Crude Price (ICP) at US$86 per barrel, rupiah exchange rate at Rp17,000 per US$ (APBN assumption Rp16,500 per US$), economic growth at 5.3 percent, and government securities (SBN) yield at 6.8 percent, resulting in an APBN deficit of 3.18 percent.
Second scenario: ICP US$97 per barrel, exchange rate Rp17,300 per US$, growth 5.2 percent, SBN 7.2 percent, deficit 3.53 percent.
Third, the most pessimistic: ICP US$115 per barrel, exchange rate Rp17,500 per US$, growth 5.2 percent, SBN 7.2 percent, deficit 4.06 percent.
"So, with these various scenarios, maintaining the 3 percent deficit is difficult unless we cut spending and growth," Airlangga stated.
To address this, Airlangga proposed issuing a Perppu on the APBN, similar to measures during the COVID-19 pandemic. The Perppu would provide government flexibility to adjust cross-program budgets without parliamentary approval, continue direct cash assistance (BLT) for energy, add emergency social programs via presidential regulations (Perpres), issue SBN, and utilize surplus budget balances (SAL).
The Perppu contents include emergency income tax (PPh) and value-added tax (PPN) incentives for affected sectors without altering tax laws, exemptions on import duties for certain raw materials to sustain exports, tax deferrals for micro, small, and medium enterprises (UMKM) and energy-intensive industries, and potential non-tax state revenues (PNBP) from windfalls in oil and gas and commodities like crude palm oil (CPO), nickel, gold, and copper through additional taxes.
"Regarding the timing of the Perppu we are preparing, it is certainly a political decision of the President," Airlangga said, leaving the final decision to Prabowo.
