Danantara, a Double-Edged Sword That Could Become a New Burden for the State Budget

The Prabowo Subianto administration has officially launched the Daya Anagata Nusantara Investment Management Agency or BPI Danantara. The institution that will manage state-owned enterprise assets of Rp14,700 trillion is expected to become a “second engine” or a second development engine outside the state budget.

The condition of the State Budget (APBN) has not been in good shape recently. The state almost has no fiscal space left to finance development and new government programs that can be described as ambitious.

Tax revenue in 2024 failed to reach the target, aka shortfall. The situation in early 2025 is also not so promising. Although it has not been officially announced, tax revenue throughout January is said to have plunged by tens of trillions of rupiah.

At the same time, the government's room to incur new debt is becoming increasingly limited. The deficit target set in the 2025 State Budget (APBN) is already considered wider than usual, at 2.53 percent of the gross domestic product (GDP), nearly reaching the safe limit rule of 3 percent.

The debt burden is becoming increasingly heavy. The allocation for debt interest payments in the state budget has taken up the largest portion of central government spending, surpassing other types of expenditures. This year, the government must allocate Rp 552.8 trillion solely to pay debt interest.

Amidst these conditions, Danantara emerged as an alternative funding source for development. It is hoped that Danantara can ease the burden on the state budget in financing development and reduce the country's dependence on foreign investments or new debts.

At first glance, this seems like an unavoidable good idea. However, the reality is not that simple. Amid an unfavorable economic condition, Danantara, which is supposed to ease the burden on the state budget (APBN), instead has the potential to add a new burden to the state budget.

As a new institution that will manage state-owned enterprise (BUMN) assets and finance various investment projects, Danantara requires substantial capital, amounting to Rp 1,000 trillion. Law Number 1 of 2025 concerning BUMN stipulates that Danantara's capital comes from two sources.

First, state capital participation (PMN) which can come from cash funds, state-owned goods, and state-owned shares in BUMN. Second, from other sources that are not defined.

The injection of funds from PMN shows that from the beginning part of Danantara's initial capital was planned to come from the APBN. The problem is, Danantara was launched when the APBN condition was bad, namely when revenues were sluggish, debts were piling up, and the fiscal deficit was widening.

To inject PMN as initial capital for Danantara worth 20 billion US dollars or Rp. 326 trillion, the government also used the results of massive budget cuts that were carried out at the beginning of this year by all levels of the central and regional governments.

Budget efficiency for Danantara does not stop this year. The President's Special Envoy for Climate and Energy who is also Prabowo's younger brother, Hashim Djojohadikusumo, said that the efficiency policy in the APBN will be carried out every year to increase investment funds to Danantara.

The target is for a total of 100 billion US dollars or Rp. 1,638 trillion to be collected during Prabowo's leadership or until 2029. Hashim calls the funds resulting from the efficiency "equity" or the net worth owned by Indonesia.

To multiply its value, the funds can be invested in BPI Danantara every year. Hashim estimates that the capital from the APBN can be doubled to 160 billion US dollars or Rp2,652.8 trillion every year. "You can understand why I'm optimistic?" said Hashim while speaking at CNBC Economic Outlook in Jakarta, Wednesday (26/2/2025).

Center for Strategic and International Studies (CSIS) researcher Deni Friawan said that Danantara was at risk because its initial capital came from the state treasury which was in a difficult condition, not from excess funds owned by the state.

This is different from the management practices of other countries' sovereign wealth funds (SWFs), which are generally funded by budget surpluses in the state treasury, such as those of China, Hong Kong, and Brunei Darussalam. There are also SWFs funded by royalties from the natural resources sector, such as in Norway, the United Arab Emirates, and Qatar.

"In other countries, SWF is funded from excess foreign exchange owned by the country that would be a shame if not used again. Danantara is not like that because it does not come from excess funds that we have, but consolidates various state assets that will then be leveraged," said Deni, Thursday (27/2/2025).

In addition to initial capital, Danantara also has the potential to reduce the potential for revenue deposits for the APBN. This is because all BUMN dividends that have usually been deposited into the state treasury will be taken over by Danantara. The government is targeting dividends of Rp 200 trillion to be deposited into Danantara this year.

So far, dividend deposits from BUMN have been included in the separated state wealth income (KND) which is one of the sources of non-tax state revenue (PNBP) in the APBN. The amount is usually around IDR 80 trillion. In 2023, dividend deposits to the state treasury were IDR 82.1 trillion. In 2024, the amount increased to IDR 86.4 trillion.

This means that after the establishment of Danantara, every year there will be a potential income of around Rp 80 trillion that is "lost" from the APBN. Responding to this, Deputy Minister of Finance Suahasil Nazara assessed that even though dividend income no longer enters the state treasury, PNBP deposits are still safe. This is because PNBP does not only depend on BUMN dividends.

"There is no problem in that. Because PNBP revenue comes from economic activities. There are from the mining sector, services, and various other sectors. In the future, there are several economic activities that are the focus of the government. The APBN will follow," said Suahasil.

Deni reminded that Danantara's success will depend heavily on strong, transparent, accountable, and independent governance from political intervention. These things are absolute requirements considering the stakes will be very high if Danantara loses and fails.

If Danantara is mismanaged and loses money, the BUMN Law has stipulated that the Ministry of Finance is part of the BUMN Rescue Committee. Deni assessed that the Ministry of Finance could be asked to create a PMN scheme and step in to provide bailout funds if Danantara fails. That would be an additional burden for the APBN.

According to Deni, if managed professionally and profitably, Danantara could multiply the benefits for the APBN and the economy in general. However, looking at the development of governance, structure, and working methods so far, he is skeptical that Danantara can achieve its desired goals.

"Problematic governance could make it difficult for Danantara to obtain funding from abroad. The indications are already visible from the Composite Stock Price Index (IHSG) which has recently fallen drastically. If it fails, the consequence is the risk of default and bankruptcy, which will ultimately be a burden on the APBN and our economy," said Deni.