Signal of Higher Tax-Free Salary and BI's Strategy to Contain Inflation: Can the Appeal of SBN Secure the Rupiah in 2027?

The government will propose an adjustment to the Non-Taxable Income (PTKP) threshold, taking into account the inflation rate from 2016 to the present. The Coordinating Minister for Economic Affairs stated that the adjustment decision is in its final stages and is only awaiting the approval of the Minister of Finance before being formalized in a Minister of Finance Regulation (PMK).

The government is coordinating with the Ministry of Finance to calculate the fiscal impact of the PTKP adjustment, including the potential reduction in tax revenue due to the increase in the non-taxable income limit. The Coordinating Minister for Economic Affairs stated that the government will rely on tax revenue to cover this potential shortfall. The PTKP adjustment will not change the fiscal deficit position or the Article 21 Income Tax (PPh 21) incentive policy.

Amidst the planned PTKP adjustment considering inflation developments, price pressures are also visible in the volatile food group. Statistics Indonesia (BPS) recorded September 2026 inflation at 0.30% month-to-month and 3.28% year-on-year. The volatile food group recorded a month-to-month inflation of 1.46% with a 0.24% contribution, primarily driven by rising prices of bird's eye chili, red chili, purebred chicken meat, rice, purebred chicken eggs, and water spinach. Year-on-year, volatile food inflation reached 5.03%, with purebred chicken meat, bird's eye chili, rice, and beef being the dominant commodities contributing to inflation.

Bank Indonesia (BI) continues to coordinate with central and regional governments to control inflation pressures, including anticipating the risks of extreme weather disruptions such as El Niño. BI observed that the increase in volatile food inflation is linked to a decline in production in several production centers due to weather disruptions and rising production input costs. The synergy of BI with the Central and Regional Inflation Control Teams (TPIP and TPID) as well as the implementation of the Inflation Control and Prosperous Food Movement (GPIPS) is expected to keep volatile food inflation under control. In general, BI believes that CPI inflation will remain within the 2.5% ± 1% target in 2026 and 2027, while core inflation and administered prices remain relatively stable.

In addition to food price pressures, the economy faces challenges from the movement of the rupiah exchange rate amidst global market pressures. The Ministry of Finance (Kemenkeu) is coordinating with Bank Indonesia (BI) to maintain rupiah stability through efforts to sustain the attractiveness of Government Securities (SBN) and strengthen foreign exchange reserves. Deputy Minister of Finance Juda Agung explained that the issuance of government debt securities in foreign currencies, including global bonds, can contribute to strengthening foreign exchange reserves because the proceeds deposited in BI become part of the reserves and can be utilized to support exchange rate stability.

The Ministry of Finance also emphasized the importance of maintaining fiscal policy credibility to sustain investor confidence in Indonesian financial assets, including SBN. Within the framework of the 2027 State Budget (APBN), the government set the exchange rate assumption at Rp17,500 per US dollar and a budget deficit of Rp671.16 trillion, or 2.4% of the GDP. Every Rp100 weakening of the rupiah against the US dollar is estimated to have a negative impact of around Rp3 trillion on the APBN balance. The government needs to strike a balance between driving economic growth and retaining investor confidence in the Indonesian economy.

The planned Non-Taxable Income (PTKP) adjustment, food inflation control, and efforts to maintain exchange rate stability demonstrate the response of the government and relevant authorities to national economic dynamics. The PTKP adjustment awaits the approval of the Minister of Finance, while Bank Indonesia and the government continue to strengthen coordination to control inflation—particularly in the volatile food group—and maintain rupiah stability by enhancing the appeal of Government Securities (SBN) and foreign exchange reserves.

Moving forward, inflation developments, the rupiah exchange rate, and fiscal policy credibility will be crucial components in maintaining economic stability. The government and relevant authorities are continuously strengthening policy synergy to anticipate the risks of food price pressures caused by weather disruptions, maintain investor confidence in Indonesian financial assets, and ensure a balance between economic growth and fiscal stability.