Ahead Of The 2026 Financial Note, Prabowo's Initial Test Of Leadership In The Midst Of Fiscal Challenges

President Prabowo Subianto is scheduled to submit a Financial Note and Draft Law on the State Revenue and Expenditure Budget (APBN) for Fiscal Year 2026 on Friday, August 15.

The speech became public attention because it would reflect the extent to which campaign promises were accommodated in the context of the fiscal situation of the second year of his leadership.

Economist and Public Policy Expert from UPN Veteran Jakarta, Achmad Nur Hidayat, said that in the discussion of the 2026 RAPBN, it was agreed that the state revenue target of 11 percent 12 percent of Gross Domestic Product (GDP), state spending of around 14 percent of GDP, positive primary balance, and a budget deficit was maintained in the range of 2.5 percent of GDP.

According to Achmad, the government's biggest challenge is to answer the high expectations of the public in limited fiscal space and currently, Indonesia is still grappling with a tax ratio that is still relatively low, around 10 percent of GDP.

"This is like a leaking pipe (receipt) never fulfills the tub (budget)," he said in a written statement, Friday, August 15.

He said that tax revenues in 2026 are estimated to increase slightly compared to the previous year, but are still lagging behind many other countries. On the other hand, the contribution of non-tax state revenues (PNBP) and grants is still relatively small.

According to him, to fund popular programs such as free lunch and milk for students, construction of a primary hospital, modernizing the main defense system equipment (defense equipment), as well as developing food barns, a more solid tax system is needed.

Achmad emphasized that tax reform is not sufficient only through an increase in tariffs, but requires comprehensive efforts through system digitization, tax data integration, local tax structuring, ineffective reduction of incentives, as well as the implementation of a carbon tax and the digital economy.

"Education is also important, so that the public sees taxes as social contracts: obligations that are rewarded with quality services," he said.

In addition to the revenue side, he conveyed that the effectiveness of the APBN is also greatly determined by the quality of spending, where central government spending and transfer funds to the regions need to be focused on priority programs.

Achmad added that the efficiency of energy subsidies, the elimination of programs that did not have an impact, and the shift in the budget to the human resource development sector became a strategic step.

He added that spending waste will only increase the deficit without producing real benefits.

The government and the DPR RI have agreed on the macro assumption of the 2026 RAPBN, including economic growth of 5 percent'6 percent, inflation of 1.5 percent'3.5 percent, interest rates of government bonds 6.6 percent' 7.2 percent, and the rupiah exchange rate in the range of Rp16,500' Rp16,900 per US dollar.

Meanwhile, oil prices are set at between US$60'80 per barrel, with an oil production target of 600,000 barrels per day and gas production reaching one million barrels of oil equivalent per day.

Achmad assessed that the assumption that the exchange rate tends to be weak reflects the strengthening of the dollar and the increasing risk of global capital flows.

According to him, if there is a trade war that slows down the global economy, the rupiah exchange rate can experience deeper pressure, so that Bank Indonesia needs to maintain rupiah stability through intervention in markets, monetary operations, and coordination in determining interest rates.

He said that the Government also needs to reduce dependence on short-term foreign debt and strengthen foreign exchange reserves through increasing added value exports and encouraging foreign exchange repatriation.

Meanwhile, the main focus of the 2026 RAPBN agreed by the government and the DPR includes food security, energy, strengthening the defense sector, and improving the quality of human resources.

Achmad assessed that the free lunch program for students is a long-term investment in improving the nutrition and productivity of the younger generation, not just social assistance.

He conveyed that to support the program, it is necessary to be accompanied by improvements to sanitation and school infrastructure, as well as nutrition education. The involvement of local governments, farmers, and local breeders is also important in order to reduce costs and improve village welfare.

Meanwhile, in the food and energy sector, accelerating investment in irrigation systems, food warehouses, developing superior seeds, and renewable energy are priorities. Downstream commodities such as nickel are also considered strategic in strengthening foreign exchange and reducing dependence on imports.

Meanwhile, in the defense sector, modernization of the weapon system is needed to maintain the sovereignty of the sea and air. However, defense spending must be carefully planned, including through technology transfers and involvement of domestic industries.

Achmad said that tax reform remains the main agenda, namely by encouraging the launch of a digital-based core tax system, the use of a Population Identification Number (NIK) as a substitute for NPWP, as well as an increase in data exchange between tax, banking and digital authorities.

"Carbon tax and plastic excise offer new sources of revenue while at the same time encouraging the green economy," he said.

He also emphasized the importance of synergy between the central government, regional governments, and the private sector.

According to him, village transfer funds and funds should be integrated with national programs, such as utilizing village public kitchens to support the provision of free lunch.

He said that the public-private partnership (public-private partnership) scheme is also considered potential to save budget while at the same time encouraging sustainable infrastructure development.

"The 2026 Financial Note will be a test for Prabowo's ability to balance ambitions with capacity. Relatively low income and high spending demand discipline. If policies are drafted realisticly to strengthen acceptance, maintain effective spending, prepare a safety net against global shocks Indonesia can sail through trade storms and geopoliticals towards the vision of Indonesia Gold 2045," he said.