AmCham Update Vol. 7 #099

Indonesia’s Fiscal Debt Ceiling under Assault in DPR, Suahasil Pledges Fiscal Credibility, Final Asian Crisis Bonds Paid in Full, Jakarta Pitches Urban Development Projects at New York Summit, Upgraded ASEAN Trade Pact set for Early Release

Sep 22, 2026

DPR Discusses Lifting 3 Percent Deficit Cap

The Indonesian House of Representatives (DPR) is discussing potential changes to the country's heretofore sacrosanct 3 percent fiscal deficit cap as it consider an omnibus revision to the state finance law, which includes the deficit cap and a public debt limit of 60 percent of GDP.

A hearing on Sep 17 saw several lawmakers say they back proposals to lift the limit in order to improve public welfare.

Previous governments have followed the guidelines since the law was passed in 2003. The limits were introduced after the Asian Financial Crisis in the late 1990s flattened the Indonesian economy and were intended to restore stability.

At the heart of the issue lies a delicate question: Should Indonesia abandon its conservative fiscal approach or will meddling spook foreign capital? Indonesia’s fiscal discipline has long been praised by international investors and lifting the limits could be fraught with peril.

The discussion comes just as newly appointed Finance Minister Suahasil Nazara pledged strict adherence to the 3 percent anchor, setting the stage for a potential standoff between legislative expansionists and technocratic fiscal guardians.

The limits became a topic of discussion and concern after President Prabowo Subianto took office in 2024, promising costly populist programs and 8 percent economic growth by 2029. The government’s 2025 budget deficit was the widest in two decades and worries over breaching the limit has been a concern of investors.

DPR Commission XI is currently hearing presentations from experts. Commission XI Chair Mukhamad Misbakhun, a member of the president’s Gerindra Party, told the Sep 17 hearing that the deficit cap has been treated with kid gloves for too long.

"We have the momentum to get out of the middle-income trap, take 233 million people out of middle income and head to high income," said Misbakhun. "That needs growth expansion. How are %u2060we going to expand growth if we… always talk about 3 percent?"

Harris Turino, a lawmaker from the Indonesia Democratic Party of Struggle (PDIP), the only party outside the ruling coalition, said the deficit cap should remain.

"If we are unable to %u2060discipline ourselves, including in maintaining the 3 percent deficit limit, the market will eventually discipline us," he told Reuters.

Asked separately for the government's response, Deputy Finance Minister Juda Agung told reporters the government is committed to keeping the fiscal deficit below 3 percent to "preserve fiscal credibility."

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Suahasil Pledges Credibility and Stronger Oversight

Finance Minister Suahasil Nazara pledged to maintain fiscal credibility and strengthen institutional confidence, during the monthly state budget press conference on Sep 18.

“The APBN [state budget] must be healthy, it must be credible. It must be well-managed, with strong revenue and efficient spending, and the deficit must be managed with caution,” Suahasil told reporters. He added that the Finance Ministry would refund overpaid taxes according to existing regulations, while also encouraging businesses to pay their fair share.

Director General of Tax Bimo Wijayanto said that officials will assess all high-risk sectors based on a taxpayer compliance matrix in accordance with audit standard operating procedures. The statement came as businesses questioned the slow disbursement of refunds, with the realization of tax refunds at only Rp 191.82 trillion ($10.7 billion), down 36.9 percent from the same period last year.

Suahasil also inaugurated fourteen senior officials to the Finance Ministry, as well as key personnel at the Financial System Stability Committee (KSSK), on Sep 21.

He added that a follow-up inauguration was requested as some officials could not attend the previous ceremony, and confirmed that appointments made by his predecessor, Purbaya Yudhi Sadewa, remained valid.

Purbaya reshuffled hundreds of officials on Sep 10, which allegedly caused tensions with tax and customs officials.

Suahasil said the appointments were an effort to maintain organizational excellence and uphold a merit-based system, and were determined by internal Finance Ministry evaluations.

“It is an ongoing effort to ensure that our organization continues to move forward, develop and respond to the challenges we face,” said Suahasil.

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Remaining Indonesian Bonds from 1997-98 Crisis Stamped ‘Fully Paid’

Marking a milestone in its economic trajectory, Indonesia has fully repaid the remaining government bonds issued in response to the 1997-98 Asian financial crisis, Finance Minister Suahasil Nazara said on Sep 20.

The news closes a nearly three-decade chapter in the government's crisis-era debt obligations and recalls the time when the economy was in a state of virtual collapse and the banking system was shattered.

Suahasil, who has been in office for only a few days, said the final payment was made in August.

“The government bonds issued as part of the response to the 1997-98 crisis were fully settled in August. This is also an achievement for us,” Suahasil said, as quoted by Antara. The repayment was funded by a Rp 58 trillion ($3.3 billion) surplus transferred by Bank Indonesia to the state treasury.

Suahasil said regulations governing the central bank surplus allowed the government to use the funds to settle the outstanding obligation.

“The use of the funds is regulated for the payment of obligations or the settlement of Indonesian government bonds that were issued at the time to address the 1997-98 crisis,” he said.

State-owned enterprise dividends no longer flow directly into the state budget but instead go to sovereign wealth fund Danantara, which made the transfer a bit more complex.

The August payment completed the settlement of varying types of government bonds issued during the crisis.

“There were several types of bonds that we issued at the time. Some were fully repaid in July 2020, while others were only fully repaid this August,” Suahasil said.

Indonesia was among the countries hardest hit by the Asian financial crisis, when the collapsing rupiah and severe stress in the banking system prompted the government to provide massive liquidity support to lenders.

Bank Indonesia provided nearly Rp 150 trillion in liquidity assistance, commonly known by its Indonesian acronym BLBI, to dozens of banks at the time.

The program subsequently became one of the country’s biggest financial scandals after a government audit found widespread fraud in the use of the emergency funds. The current government is still trying to recover stolen BLBI funds.

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Jakarta Pitches Urban Development Projects at New York Summit

Jakarta Governor Pramono Anung pitched 37 urban development projects worth a combined $7 billion to international city leaders and potential investors during the Urban 20 (U20) Mayoral Plenary in New York on Sep 20.

Invited by New York City Mayor Zohran Mamdani, Pramono highlighted Jakarta’s economic performance, saying the city’s economy grew 5.52 percent year-on-year in the second quarter while inflation remained at 2.5 percent. He said Jakarta attracted $10.5 billion in investment during the first six months of 2026, equivalent to around 17.2 percent of Indonesia’s total investment realization.

Pramono said the 37 projects represented investment opportunities across Jakarta with a combined potential value of $7 billion. The projects had previously been presented by the Jakarta administration as investment-ready opportunities, with a combined value of around Rp 115 trillion ($6.4 billion).

Beyond investment, Pramono outlined Jakarta’s approach to urban mobility and flood management, including the expansion of the Transjabodetabek network, free public transportation for 15 designated groups, flood-control infrastructure, limits on groundwater extraction and development of the Giant Sea Wall.

During a bilateral meeting on the sidelines of the summit, Mamdani also expressed support for Jakarta’s plan to issue regional bonds to finance urban infrastructure and offered to send a New York’s financial team to share its experience with Jakarta on preparing and issuing bonds.

“I’m enthusiastic and fully support Jakarta’s plan to issue regional bonds. New York has also used bonds to finance infrastructure projects, including wastewater treatment and various public facilities,” said Mamdani.

The U20 Mayors Summit, co-chaired by New York City and Los Angeles, was held Sep 19-21 and brought together mayors, deputy mayors, and senior officials from 34 cities. The summit concluded with a communiqué calling for cities to receive greater authority and resources to address urban challenges including housing, climate change, and migration.

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Upgraded ASEAN Trade Pact gets Early Release

ASEAN economic ministers have agreed to roll out an upgraded regional goods trade pact ahead of schedule, Singapore Deputy Prime Minister Gan Kim Yong said in a Facebook post on Sept 19.

The decision was made on the first day of talks during the ASEAN Economic Ministers’ Meeting taking place in Manila Sep 19-22.

The ASEAN Trade in Goods Agreement (ATIGA) sets rules aimed at reducing trade barriers and making it easier for businesses to sell products across borders.

The upgraded agreement was originally due to take effect on June 1, 2027, 18 months after it was signed, but ASEAN will move toward implementation by the end of 2026.

Gan said this would allow goods to move more easily across borders and give businesses better access to markets across the region.

“ASEAN’s direction is clear: We will remain united in our resolve to integrate more deeply within the region and strengthen our partnerships beyond it,” Gan said.

Gan said the economic ministers also began a review of the ASEAN Trade in Services Agreement. The ministers also discussed the need to implement the ASEAN Digital Economy Framework Agreement, which is expected to be signed when ASEAN leaders meet in Manila in November.

Gan said the focus should now turn to ASEAN’s digital ambitions for businesses and consumers across the region.

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Building trust in the age of AI takes center stage at International Association of Business Communicators (IABC) Indonesia conference

AmCham Indonesia was pleased to support the 5th IABC Indonesia Conference & Awards 2026 as a community partner. Held in Jakarta on Sep 18 under the theme “Driving Communications Impact: Building Trust in the Age of AI,” the event brought together communication professionals, policymakers and industry leaders to examine how artificial intelligence is reshaping organizational credibility and public trust.

Opening the conference, IABC Indonesia President Elvera N. Makki described the current environment as a “disruption of trust,” as AI enables information, including misleading and manipulated content, to be produced and distributed at unprecedented speed. She emphasized the increasingly important role of communicators in helping audiences identify credible information and make better-informed decisions.

Deputy Minister of Communication and Digital Affairs Nezar Patria highlighted information integrity as a critical foundation for the responsible use of AI. He called for strong safeguards, regulatory compliance, testing and evaluation, particularly when AI is used in public services. Deputy Minister of Higher Education, Science and Technology Stella Christie also underscored the importance of infrastructure, supportive policies and talent development in strengthening Indonesia’s AI ecosystem.

Other speakers emphasized that technological advancement must remain people-centered, transparent and accountable. The discussions reinforced the strategic role of communications professionals in connecting technological innovation with public needs and ensuring that AI contributes to trusted and meaningful outcomes.

For further details, please see the attached press release.

PRESS RELEASE

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Update is AmCham’s regular newsletter on developments related to investment, the economy, regulations and issues related to doing business in Indonesia. It comes out three times a week. It is edited by AmCham Managing Director Donna Priadi and written by the AmCham Staff.

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