KEY HIGHLIGHTS
- The H1 2026 deficit landed at -IDR196.5T (0.76% of GDP), narrower than the 0.84% booked a year earlier and comfortably inside both the 2.68% full-year target and the 3% legal cap. Revenue reached IDR1,459.4T, up 21.4% YoY at 46.3% of target; still short of the 50% on-pace mark, but a clear step up from 40.0% at this point last year.
- Revenue breadth is real. Tax rose 24.6% to IDR1,035.7T, led by VAT and PPnBM at +42.2% and corporate income tax at +28.6%, while non-tax revenue is already 59.0% of budget on front-loaded SOE dividends and royalties. June single-month revenue of about IDR274T shows the post-SPT organic run-rate held up far better than the May hangover implied.
- Spending tells a recentralization story: central-government outlays surged +29.4% while transfers to regions fell 11.2% against a pagu cut of roughly 25%. MBG drove goods spending to double (+100.7%), and the primary balance stayed in surplus at IDR85.1T, up from IDR58.6T at end-May.
- The structural watch item is subsidy and compensation at IDR233.0T, already 52.1% of the full-year budget versus a 34%–40% H1 share in 2022–2025. Energy compensation of IDR116.9T carries no formal ceiling, and roughly IDR46–55T of deferred compensation is due to settle in a single September tranche; financing is 65.6% complete, with a IDR255.5T SiLPA buffer.
- Our stance is that the H1 print is a net positive for Indonesian government bonds, because a contained deficit, a widening primary surplus, and financing that is already two-thirds done reduce H2 supply pressure, while BI holding the rate at 5.75% and defending the Rupiah through inflow incentives rather than further hikes makes the fiscal and monetary mix work for SBN carry. Key watch: we stay constructive but not outright bullish on duration — the no-ceiling subsidy line, the September settlement, and a full-year deficit the Ministry projects drifting toward 2.85% of GDP against two Negative rating outlooks keep the risk skewed to execution in H2.
Regards, Aldiracita Research
