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When the Budget Slows Down

Central government spending through the end of September 2025 reached Rp1,589.9 trillion, or only 59.7% of the Budget Outlook of Rp2,663.4 trillion.
This figure marks a lower realisation compared to last year (Rp1,616.1 trillion or 65.49% in the same period), despite the budget ceiling actually being larger.

In other words, the government still has significant "fiscal firepower" but has not yet fully deployed it.

Suboptimal Execution
The breakdown shows a slowdown across nearly all components:
- Ministry/Agency Spending (K/L): Rp800.9 trillion (62.8%) down from 73.7% a year earlier
- Non-K/L Spending: Rp789 trillion (56.8%) down from 59% last year

The only relatively stable area is Transfers to Regions (TKD) with absorption at 74.6%, slightly higher than last year (74.1%). This means regions are actually showing faster fiscal performance than the central government.

According to Purbaya Yudhi Sadewa, spending effectiveness is now more focused on priority programmes, social assistance, and infrastructure spending. However, challenges remain: administrative processes and tender procedures continue to be obstacles, particularly in technical ministries.

Impact on Growth and Fiscal Balance
The slowdown in spending realisation could dampen economic growth momentum in quarters III–IV, particularly from government consumption and infrastructure projects.

However, from a fiscal perspective, the Budget position remains relatively healthy:
Budget deficit: Rp371.5 trillion or 1.56% of GDP
Primary surplus: Rp18 trillion

This indicates the government remains on track with fiscal consolidation, with additional room for stimulus by year-end if needed.

Rupiah: Stable But Not Secure
In the foreign exchange market, the Rupiah is trading in the range of Rp16,550–16,600/USD, attempting to balance global pressures with support from domestic policy.
Bank Indonesia continues to intervene to maintain stability, while the government is signalling a possible increase in liquidity injections to state-owned banks to support the financial market.

Positive factors such as trade balance surplus, solid fiscal position, and potential inflows in quarter IV are supporting the exchange rate.
However, on the other side, US dollar strength and yield differentials continue to pressure emerging market currencies, including Indonesia's.

Our Take
Slow spending execution means fiscal stimulus is not yet at full strength, even though budgetary room remains large.
Typically, acceleration occurs in quarter IV as projects are realised and social assistance is disbursed towards year-end.
However, early delays could limit fiscal contribution to overall GDP growth.

For the Rupiah, near-term direction still depends on global dollar strength and BI intervention credibility.
As long as fiscal policy remains disciplined and spending realisation begins to pick up, Indonesia's macroeconomic stability will hold, although near-term volatility will persist.

Slow spending does not mean weakness, but rather reflects execution challenges amid efforts to maintain fiscal discipline.
With solid macroeconomic fundamentals and stimulus room still available, a combination of fiscal and monetary policy will be key to maintaining economic momentum and Rupiah stability towards year-end.