Synergy of Fiscal and Monetary Policy: Addressing Indonesia's Economic Challenges
Taxindo Prime Consulting
Monday, September 01, 2025 | 12:16 WIB
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The Indonesian economic landscape continues to be dynamic, demanding a comprehensive synergy of fiscal and monetary policies. Various recent news highlights how the government and Bank Indonesia are designing strategies to address the issue of income inequality, manage state revenue through tax reform and the introduction of excise duties, maintain liquidity stability, boost the efficiency of the payment system, and streamline tax expenditure. All these steps are aimed at achieving inclusive and sustainable economic growth amidst global dynamics.
Tax Policy as an Equalizer and Revenue Source
Finance Minister Sri Mulyani Indrawati consistently emphasizes the role of taxation as a vital instrument for redistributing wealth and reducing income inequality. Progressive taxation is expected to foster social justice, encouraging the more capable to contribute more.
In an effort to strengthen the fiscal foundation, the government is also seeking new revenue streams. The proposed excise tax on sweetened beverages in packaged form (MBDK) has become a point of focus. The debate surrounding this excise reflects the dilemma between a public health objective—curbing excessive sugar consumption to reduce the risk of non-communicable diseases—and the economic impact on industry and people's purchasing power. The decision on this excise will be crucial in how the government balances these two important goals.
Liquidity Dynamics and the Push for Digital Payments
On the monetary side, the liquidity of the Indonesian economy is considered stable. However, a challenge arises from the slow disbursement of bank credit to the real sector. This condition indicates that although funds are abundant, banks' caution in extending loans could impede the acceleration of economic growth, which, in turn, may affect tax revenue and business activity.
To support economic efficiency and transactions, Bank Indonesia (BI) continues to take proactive steps. BI is preparing to expand the QRIS digital payment system to China and Saudi Arabia. This expansion is expected to simplify cross-border transactions, especially for tourists and pilgrims, which will ultimately boost economic activity and potentially broaden the base of easily monitored transactions, even if not directly related to tax revenue.
Optimizing Tax Expenditure for Fiscal Strengthening
Responding to various economic dynamics and to pursue state revenue targets, the government also plans to curb or optimize tax expenditure in 2026. Tax expenditure, which takes the form of tax incentives or facilities, indirectly reduces potential state revenue. By reviewing and streamlining these facilities, the government hopes to optimize the state's coffers without having to drastically increase tax rates, and to ensure that every tax incentive provided is truly targeted and delivers a significant positive impact on the economy.
These various news items, though discussing different aspects, are fundamentally interconnected in the efforts of the government and monetary authorities to build a strong economic foundation. From using taxation to tackle inequality, exploring new revenue sources through excise duties, managing liquidity and credit, expanding digital payment infrastructure, to streamlining tax expenditure, all are integral parts of the grand strategy to maintain macroeconomic stability, foster inclusive growth, and improve the welfare of the Indonesian people.
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