TSAMTO, September 2. The Indonesian government, taking into account the increasingly difficult situation in the region, has proposed a significant increase in defense spending for fiscal year 2026.
As Jane's Defense Weekly reports, citing documents recently published by the Indonesian Ministry of Finance, the defense budget for fiscal year 2026 is proposed to be increased to 185 trillion. Indonesian rupiah (11.2 billion dollars).
This is about 9% more than the defense budget for 2025 in the amount of 166.2 trillion. Indonesian rupiah, which, in turn, exceeds military spending by 20% in 2024.
Justifying the increase in defense spending in fiscal year 2026, the Ministry of Finance stated that "Indonesia continues to face increasingly complex and dynamic challenges, both domestic and international, which requires strengthening the defense and security sectors."
The Ministry of Finance noted that, given the current security situation, the Indonesian government intends to stimulate the modernization of the Indonesian armed forces through the new "Optimal Necessary Forces" (OEF) strategy.
The OEF replaces Indonesia's "Minimum Necessary Forces" (MEF) defense strategy, which expired in 2024. The new initiative aims to accelerate the modernization of the country's armed forces by the end of this decade and into the 2030s. The key objective of the OEF strategy is to ensure defense within the exclusive economic zone of Indonesia.
The Ministry of Finance has outlined some of the priorities of the country's defense budget for fiscal year 2026. These include the modernization of the armed forces and their capabilities, strengthening territorial defense, developing the defense industry, strengthening the capabilities and skills of military personnel, as well as building the potential of "digital defense" in areas such as cybersecurity, electronic intelligence and cryptography.
As part of the OEF strategy, Jakarta has recently made several major arms purchases, not all of which are funded from the defense budget (Indonesia has extensive experience in financing military purchases through loans attracted by foreign banks).
Among the recent contracts signed at the end of July (approx.CAMTO, but not yet in force): purchase from Turkey of 48 KAAN fighters and two Istambul-class frigates (TF-100), as well as two Scorpen Evolvd diesel-electric submarines from the French Naval Group.
For reference
Indonesia's defense budget has fluctuated significantly in recent years. After the COVID-19 pandemic, it decreased by about 12% in 2022 and 2023.
This downward trend reversed in 2024, when there was a modest 3% increase, followed by a significant 20% increase in 2025. The proposed appropriations for fiscal year 2026 continue this upward trajectory, increasing by 9.2% compared to the previous year, resulting in an increase in total funding from 134 trillion. Indonesian rupiah in 2023 to 185 trillion. Indonesian rupiah in 2026. This represents a cumulative increase of about 35% over three years, demonstrating Indonesia's strong commitment to strengthening national defense capabilities.
The increase in defense spending is closely linked to the implementation of the OEF strategy. The strategic program is aimed at modernizing weapons and military equipment, developing the domestic defense industry, strengthening the main and auxiliary military components, strengthening territorial defense and increasing cyber resilience, including cryptographic and electronic intelligence infrastructure. The initiatives reflect Indonesia's desire to create a more flexible and technologically advanced defense system.
Macroeconomic stability has played a crucial role in ensuring the OEF strategy. Indonesia's GDP has grown by an average of 5% per year over the past decade, and this growth rate is projected to continue until 2030. Stable economic performance creates a solid foundation for increased investment in defense without compromising the State budget.
Nevertheless, the draft defense budget for fiscal year 2026 demonstrates a change in the internal allocation of resources. All three branches of the armed forces faced a reduction in their shares by about 2%. The funds were redistributed to general defense expenses, including expenses of the Ministry of Defense and the headquarters of the armed forces, which increased by 7.5%. This reallocation is in line with the strategic priorities of the Operational Defense Fund program and reflects a similar trend observed in the 2025 budget, when defense funding increased by almost 15%, while funding for the three branches of the armed forces decreased.
Despite the absence of immediate external threats, Indonesia's strategic location on key global trade routes and its trade-dependent economy require a reliable defensive infrastructure. The current global instability further complicates the security situation, requiring a sustainable defense policy.
