Fiscal Crisis Is Already Here - Magz TEMPO

Finance Minister Purbaya Yudhi Sadewa asks for state-owned enterprise profits to go into the state budget, not Danantara. The fiscal situation is in the red.

TOUTED as the manager of state-owned enterprise dividends for major investments, Danantara’s executives are instead fighting with the government over profits. Finance Minister Purbaya Yudhi Sadewa is scrambling to plug the fiscal hole caused by President Prabowo Subianto’s major projects. He plans to withdraw Rp120 trillion in SOE profits.

The problem is that under the new State-Owned Enterprises Law, SOE profits must first go to Danantara. The SOE holding company will reinvest the profits in the hope of generating greater returns. That is the theory. In reality, the investment returns have yet to materialize, and the profits are already being fought over.

As separated state assets, state-owned enterprise assets now belong to Danantara, which reports directly to the president. Minister Purbaya no longer has the authority to withdraw the funds directly into the state treasury. Before the State-Owned Enterprises Law was revised, the dividends were directly recorded as non-tax state revenue in the State Budget.

With no legal basis to claim the profits, Minister Purbaya is relying on a presidential order to justify his demand. He claims the withdrawal of SOE profits was decided at a limited meeting attended by Danantara’s management. The problem is that Danantara executives say they were unaware of any such decision.

Purbaya may have run out of options to cover government spending. He also has to pay Rp40 trillion in installments on loans for the red-and-white cooperatives’ development to state-owned banks by the end of September. Then there are Rp174.4 trillion in government bonds maturing this month. Government spending also typically increases in the second half of the year.

With these demands, Purbaya risks violating the State Finance Law because the budget deficit could exceed 3 percent of gross domestic product. In this year’s State Budget, the government projects a deficit of 2.85 percent, up from the initial target of 2.68 percent.

In addition to President Prabowo’s favored projects, such as the free nutritious meal program and the red-and-white cooperatives, there are several major expenditures in the short term. Energy subsidies could swell as global oil prices rise due to the unresolved war in Iran. In early July 2026, global crude oil prices rose again to US$109 a barrel, far above the State Budget assumption of just US$70.

The rising value of oil imports could also further weaken the rupiah, widening the balance-of-payments deficit. As a result, foreign exchange reserves could also be depleted. Bank Indonesia may have to raise interest rates or create new investment instruments to attract rupiah back, similar to Bank Indonesia Rupiah Securities. These rupiah-denominated debt securities can help prevent the exchange rate from plunging, but they come at a high cost because of their high yields.

The economy will become even more chaotic. Even after Bank Indonesia steps in, the fiscal situation is becoming increasingly disorderly. Before the dispute over state-owned enterprise profits, Purbaya had already withheld tax refunds owed to taxpayers. Now he plans to use revenue-sharing funds to repay regional governments’ debts to Sarana Multi Infrastruktur, an SOE under the Finance Ministry. After cutting regional transfer funds and village funds, Purbaya is still taking money that belongs to regional governments.

The fiscal crisis is already here. Get ready for worse.