The negative outlook revisions by Moody’s and Fitch Ratings, along with the survey results from LPEM UI, serve as a strong warning regarding the risks of fiscal expansion through populist programs such as MBG, which could potentially threaten the 3 percent deficit threshold.
The government must continue prioritizing fiscal discipline and legal certainty rather than short-term populism in order to maintain the investment-grade rating, minimize debt costs, and ensure healthy fiscal sustainability amid geopolitical turmoil.
The early months of 2026 have become a rather tense period for state financial managers in Lapangan Banteng. Two major international rating agencies, Moody’s and Fitch Ratings, consecutively revised Indonesia’s sovereign debt outlook from stable to negative.
Although our sovereign credit rating still remains at the Baa2/BBB level, this outlook revision is a clear message from the global financial market: the predictability of our policies is being questioned.
This is not merely a technical issue for economists, but rather about how expensive the interest on public debt will become for future generations. If the rating declines, the cost of our sovereign bonds will soar, consuming portions of the budget that should otherwise be allocated for schools and hospitals.
The main concern highlighted by both agencies is the government’s ambitious fiscal expansion plan. The focus on pursuing an 8 percent economic growth target through large-scale social programs such as the Free Nutritious Meals (MBG) program has raised many concerns regarding fiscal sustainability.
Fitch Ratings specifically noted the risks arising from plans to revise the State Finance Law, which could loosen the “sacred” 3 percent deficit cap relative to GDP.
For investors, this 3 percent limit is not merely an administrative figure; it is an anchor of confidence that has safeguarded Indonesia’s credibility since the 1998 crisis. Relaxing it without a clear emergency justification would be viewed as a setback in financial governance.
The results of the First Semester 2026 Economist Survey conducted by LPEM UI involving 85 economists further reinforce these concerns. The consensus among experts indicates a trend of negative perceptions that has not reversed over the past 18 months. Average responses remaining in negative territory reflect anxiety over stagnation being answered with expansionary spending policies that may not necessarily be productive in the short term.
The problem is that while government spending grows significantly at the beginning of the year, the state revenue ratio is expected to remain constrained due to contractionary revenue-side policies, such as the cancellation of the VAT increase. This imbalance creates a fiscal gap that must be covered through new debt.
This uncertainty is worsened by global dynamics. With the Rupiah weakening beyond IDR 17,000 per US dollar, the burden of servicing foreign debt automatically increases. Data shows that the debt service ratio has already exceeded 40 percent of state revenues.
This is a highly challenging figure because it reduces fiscal space for financing basic infrastructure and deeper economic transformation. If governance effectiveness declines and policy predictability erodes, the macroeconomic stability that has long been our source of pride could begin to weaken.
Therefore, the government must not simply respond defensively or regard this outlook revision as a form of international unfairness.
The concrete recommendations are as follows: first, the government must provide absolute legal certainty that the 3 percent deficit limit remains the fortress of fiscal defense. The ambition of achieving 8 percent growth should be pursued through spending efficiency improvements and a better investment climate, not through excessive fiscal pumping.
Second, every major program such as MBG must be accompanied by a transparent and credible financing roadmap, for example through optimizing digital taxation or closing budget leakages, rather than merely increasing debt burdens.
In addition, synergy between the Ministry of Finance and new institutions such as Danantara must be managed very carefully to avoid creating contingent liabilities that are not recorded in the state budget.
Transparency is the primary currency in maintaining investor confidence. We must learn from neighboring countries that became trapped in debt crises due to unmeasured infrastructure ambitions and weak transparency.
We must remember that our economic fundamentals, such as abundant natural resources and strong domestic consumption, are still recognized as solid by rating agencies. However, potential remains only potential if it is not managed through prudent and disciplined policies.
Maintaining investment-grade status is not about pleasing Moody’s or Fitch Ratings, but about preserving the dignity and economic independence of the nation so that it does not collapse under debt interest burdens that suffocate future generations.
Fiscal discipline is the seatbelt that keeps us safe while accelerating toward the vision of Golden Indonesia.
This article was published by RMOL.ID Republic Merdeka.
