What's Wrong with Our State Budget?

(1) What is the performance of the 2024 State Budget like?

The performance of the 2024 State Budget closed with a fiscal deficit of 2.29 percent of the gross domestic product (GDP). Thus, throughout the past year, the state treasury experienced a "shortfall" of IDR 507.9 trillion. This achievement is lower than the government's mid-year projection, which was 2.7 percent of GDP.

The Ministry of Finance recorded that the State Budget (APBN) deficit was finally successfully reduced due to several factors. These include the improvement of the global economy in the fourth quarter and the budget-saving measures implemented by the government over the past two months of 2024 under the direction of President Prabowo Subianto.

Minister of Finance Sri Mulyani Indrawati, Monday (6/1/2025), explained that the government initially set a deficit target of 2.29 percent of GDP, equivalent to Rp 522.8 trillion, in the 2024 State Budget. However, in the mid-year performance projection of the State Budget in June 2024, the government significantly revised the deficit target.

At that time, the government expanded the estimated deficit from 2.29 percent to 2.7 percent of GDP, equivalent to Rp 609.7 trillion. The reason was that the economy was under extraordinary pressure, necessitating a more extensive deployment of the state budget.

(2) What is the condition of the APBN in the first 100 days of Prabowo-Gibran?

The performance during the first 100 days of the Prabowo Subianto-Gibran Rakabuming Raka administration indicates that the country's financial condition is under pressure. Although the administration is still in its infancy, various fiscal policies have emerged that are surprising, problematic, and potentially further burden the state budget.

At least three fiscal policies have marked the first three months of Prabowo's administration. First, the government's decision to cancel the general increase in Value-Added Tax (VAT) rates after a prolonged debate. Second, a substantial fiscal stimulus disbursed by the government to maintain the purchasing power of the public and the business sector.

Third, instructions from President Prabowo Subianto to all levels of central and regional government to save the budget of up to IDR 306.7 trillion in the 2025 budget year. This directive is stated in Presidential Instruction Number 1 of 2025 which was signed by Prabowo on January 22, 2025.

On the one hand, these policies provide a sigh of relief for the people and the business world. However, the implication is an additional burden for the APBN, which since the beginning of the transition of government from President Joko Widodo to Prabowo has been in a difficult condition.

(3) Where did the funds from the 2025 APBN efficiency and relocation go?

The Prabowo Subianto government is targeting the accumulation of funds from the reallocation of the state budget for needs in 2025 worth Rp 750 trillion. This fund is planned to be injected into Danantara and finance the Free Nutritious Meal program.

Information regarding the total value of the budget reallocation or what the government calls savings of IDR 750 trillion was conveyed by President Prabowo Subianto in a speech at the Gerindra Party Anniversary event in Sentul, Bogor, West Java, on Sunday (16/2/2025).

While giving a speech as the party's general chairman, President Prabowo explained that the total value of savings by the government reached 44 billion US dollars or equivalent to around Rp. 750 trillion.

The emergence of the figure of Rp 750 trillion raises questions. Because, the target of budget savings that is currently being carried out by the government according to Presidential Instruction (Inpres) Number 1 of 2025 is Rp 306.7 trillion.

(4) Who is waiting for the 2025 APBN performance report?

So far, the release of the APBN KiTa presentation has been seen as a culture of good information transparency in the eyes of investors. If transparency fades in the Prabowo era, it will be a setback for the practice of public information transparency and democracy in Indonesia, which could ultimately hit the country's economy.

Bank Permata Chief Economist Josua Pardede said investors are still waiting for developments in the announcement of the state budget performance going forward. He suspects that the delay in reporting is due to the impact of the budget efficiency policy and the problematic Coretax implementation issue which has had an impact on revenue.

"Or, there is indeed another agenda that the government considers more important so that it postpones the announcement of the realization of the APBN early this year. So, we'll just see how it develops in the future," said Josua.