JAKARTA, Thekabarnews.com—Former Indonesian finance minister and senior economist Chatib Basri has called on the government to cut spending selectively as fiscal pressures mount from an uncertain global economy. In addition, he cited a weakening rupiah and rising geopolitical risks.

“There are three basic policy options on how to manage the state’s finances: increase government revenue, cut public spending, or borrow more,” Basri said at the Grab Business Forum 2026 in Jakarta on Tuesday, June 9, as cited in Suaracom.

“The role of the finance minister is fundamentally important. There are three ways the government can make money. Increase revenue, reduce spending, or borrow. Those are the only options,” Basri said.

“If the government cannot raise revenue, it must cut spending. If it cannot cut spending, it must borrow. It’s that simple,” he added.

“Indonesia’s fiscal flexibility is getting narrower at this time, amid slowing global economic growth, continued pressure on the rupiah and the possibility of higher global energy prices due to geopolitical tensions in the Middle East,” Basri remarked.

“Raising taxes could dampen business activity and reduce household purchasing power, so that is not a realistic solution in the current economic environment,” he said.

“Now is not the time to raise taxes. This would increase the pressure on business and consumers,” he said.

Basri argues that high global interest rates have made borrowing prohibitively expensive, driving up financing costs. “Anyone who has to borrow money today will have very high financing costs,” he added.

Basri believes that, considering these limits, the government should carefully reduce some public spending. Furthermore, he says such cuts should be done while still keeping important services and development goals.

He said carefully targeted spending cuts would help maintain fiscal credibility without having a big negative impact on economic activity.

“I think the most realistic option is selective spending cuts,” said Basri.

If we prudently manage our state budget, we can increase investors’ confidence in us. As a result, we can improve our economic resilience in times of uncertainty in the global economy,” he said.

Basri said financial markets are more worried about Indonesia’s long-term fiscal sustainability than overall economic fundamentals.

The increase in Indonesia’s Credit Default Swap (CDS) premium since the beginning of the year was a sign that investors are more cautious on fiscal risks, he said.

Basri explained that the CDS market’s reflection of higher fiscal risk accounts for approximately 23 percent of the recent rupiah depreciation.

“So that means our biggest problem is confidence risk.” He said, “The market environment can improve if the government solves that problem.”

Meanwhile, Basri warned against looking at Indonesia’s debt-to-GDP ratio in isolation when assessing the country’s borrowing capacity.

Instead, governments should ask if state revenues are sufficient to cover future interest and debt payments.

He said the relatively low tax ratio in Indonesia limits fiscal flexibility and calls for disciplined spending policies.

To maintain macroeconomic stability in the difficult global environment, Indonesia would have to increase revenue collection, improve spending efficiency, and protect the market’s confidence, he said.

“The best way to protect economic growth and boost investor confidence is through careful fiscal management rather than aggressive borrowing or tax increases while international financial markets remain volatile,” Basri said.

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