by Nurul Fitri Ramadhani
JAKARTA, Feb. 18 (Xinhua) -- The Indonesian government has announced a reduction of 306.69 trillion rupiahs (about 18.9 billion U.S. dollars) in its 2025 state budget, targeting all ministries and government institutions.
The cut, taken from the total 2025 state expenditure of 3,621.3 trillion rupiahs, primarily aims to improve government spending efficiency and allocate funds to priority programs. Among these is the free nutritious meal program, a key initiative of President Prabowo Subianto's election campaign, which benefits over 82 million students nationwide and pregnant women.
Although the savings focus mainly on ceremonial budgets, business trips, seminars, printing, and institutional procurement, the policy has sparked concerns about its potential impact on Indonesia's economic growth, especially as the country targets 8 percent growth over the next five years.
However, the efficiency push is also seen as an opportunity to attract investment, encouraging private sector involvement in development projects.
Arsjad Rasjid, chairman of the Indonesian Business Council Supervisory Board, said that streamlining the state budget would open doors for private entities to enter sectors traditionally dominated by the government, particularly infrastructure, including airport management and public transportation operations like buses and trains.
"In the past, these sectors were rarely open to private investors. Now, they will be accessible for us, the private sector, to invest in," Rasjid said in Jakarta.
The former chairman of the Indonesian Chamber of Commerce believes the government will increasingly rely on private-sector investment due to limited fiscal space.
"The initial investment must come from us first-local investors. Then, foreign investors can follow," he added.
Among the hardest-hit sectors is infrastructure, with its budget, managed by Indonesia's Ministry of Public Works, cut by 70 percent, from an initial 110.95 trillion rupiahs to just 29.57 trillion rupiahs.
Minister of Public Works Dody Hanggodo said that the budget reduction would likely delay 21 major projects, including road construction, water resource management, and residential developments.
Despite the cuts, the Indonesian government has assured that the construction of the new capital city, Nusantara, in East Kalimantan, will not be affected. Basuki Hadimuljono, head of the Nusantara Capital City Authority, confirmed that the project would receive an additional 8.1 trillion rupiahs.
While some Indonesian economists warn that budget cuts could reduce purchasing power, create public investment uncertainty, and limit job creation and labor productivity, Rasjid argues that budget efficiency is about reallocating resources to strengthen human capital development.
"It's not just about efficiency but also effectiveness. The key is ensuring that spending is targeted correctly to drive economic growth," Rasjid noted.
Economic expert Hairul Anwar, a lecturer in Fiscal Policy and Management at Mulawarman University, believes that the budget efficiency measures could have widespread positive effects on both short- and long-term economic stability.
"By reducing budget waste and reallocating funds to more productive sectors, the government can enhance fiscal stability, which will directly boost market and investor confidence," Anwar said.
He added that improved investor confidence would lead to a stronger investment climate in Indonesia, ultimately lowering borrowing costs.
"If executed properly, these efficiency measures could accelerate economic growth and job creation. However, the government must ensure that budget cuts do not compromise sectors that directly affect community welfare. This will be the biggest challenge in implementation," he said. (1 Indonesian rupiah equals 0.00006 USD) ■
