ABSTRACT
The history of fiscal policy started in the late 1960s when the New Order government, under the leadership of Soeharto, took over from the first president Soekarno. In Soekarno’s era, the budget deficit was financed by money creation which ultimately fueled hyperinflation in the mid-1960s. This policy was drastically changed in the Soeharto era. To control inflation, the size of the government deficit was reduced and in contrast to the policy of the Old Order government, the deficit was financed only by foreign aid and loans. The policy of a balanced budget was pursued every fiscal year and this became the hallmark of the New Order economic policy. The economic stabilization program brought positive impacts to the country with inflation being brought under control to around 10-30 percent per annum.
