Indonesia's 2026 budget deficit narrows amid subsidy surge while Papua economy rebounds

Indonesia's state budget (APBN) for the first half of 2026 showed a fiscal deficit of Rp196.5 trillion, equivalent to 0.76% of GDP, lower than both the first quarter of the year and the same period in 2025. Revenue rose sharply, with tax receipts reaching Rp1,035.7 trillion (up 24.6% year‑on‑year) and customs and excise contributing Rp152 trillion. Non‑tax revenue also grew to Rp271 trillion. Government spending increased 17.8% year‑on‑year to Rp1,298.6 trillion, driven largely by a jump in subsidies and compensation payments that totalled Rp233 trillion, 52.1% of the budget target. Minister of Finance Purbaya Yudhi Sadewa said the deficit remains “within a safe and controlled range.” The primary balance stayed positive at Rp85.1 trillion.

In Papua, regional authorities reported signs of economic recovery in 2026. South Papua recorded a 3.93% annual growth rate, while Central Papua narrowed its contraction to –8.38% from a deeper slump. Inflation fell to 2.79% nationally, with South Papua at 2.17%, though the Highlands region still faced 4.84% inflation due to high transport costs. Poverty rates declined across most provinces, and the Gini ratio improved to 0.347 in the Highlands, below the national average of 0.363. Director‑General of Treasury regional office Izharul Haq highlighted that “government spending is expected to have a multiplier effect on the local economy,” supporting a stronger and more evenly distributed recovery.