Indonesia is tightening government spending at year-end, requiring ministries and agencies to cut unused travel budgets by 30%, as rising oil prices and high costs of flagship programs weigh on the fiscal budget. As of the end of September, the fiscal deficit had widened to 1.24% of GDP.

Finance Minister Sri Mulyani Indrawati said on Friday that the government is still on track to meet its full-year deficit target of about 2.8% of GDP.

Higher oil prices, strong domestic demand for subsidized fuel and liquefied petroleum gas, and the shift to monthly subsidy payments pushed energy subsidy and compensation spending to 377 trillion rupiah (US$21.1 billion) as of the end of September, a year-on-year increase of more than 50%.

Sri Mulyani said Indonesia's actual average crude oil selling price is currently US$92 per barrel, well above the US$70 per barrel assumed in this year's budget, and prices are expected to rise further.

"If oil prices continue to rise, subsidy spending will increase accordingly," Sri Mulyani said at a press conference. "All of this will directly hit the state finances, and we must bear the related expenditures and ensure payments are disbursed."

While the government must implement programs such as free meals and village cooperatives, it also needs to keep the fiscal deficit within the legal ceiling of 3% of GDP. This spending cut highlights the pressure it faces.

The Ministry of Finance said in a notice dated October 8 that the travel budget cut applies to funds not yet used as of that date.

Agencies are also required to postpone the purchase of new vehicles, official housing, and office renovation projects, prioritize online meetings, and limit non-essential travel.

Sudarto, director general of the National Budget at the Ministry of Finance, said at the same press conference that these measures are intended to align government spending with development priorities while safeguarding public services and ensuring agencies meet their set targets.

Sri Mulyani said the government is also accelerating tax refunds for companies facing cash flow pressure, focusing on labor-intensive industries and small businesses.

Faster tax refunds are expected to reduce domestic value-added tax revenue.

In addition, the government is exploring new sources of tax revenue.

Jaka Budi Utama, director general of Customs and Excise, said at the press conference that Indonesia plans to impose a sugary drink tax in the second half of 2027, targeting 1.7 trillion rupiah in revenue, with the rate and detailed rules still under discussion.