Budget Cuts for Danantara, Short-Term Economy at Risk of Weakening

JAKARTA, KOMPAS – The government will fully allocate the budget cut amounting to Rp 308 trillion to the investment fund of BPI Danantara. Several research institutions are concerned that this move could hinder economic growth in 2025, which has already been affected by the budget cut policy.

The announcement regarding the utilization of budget efficiency results was delivered by President Prabowo Subianto during the launch of the Investment Management Agency (BPI) Daya Anagata Nusantara (Danantara) at the Presidential Palace, Jakarta, Monday (24/2/2025).

Prabowo said that in 100 days of his leadership, the government has managed to secure more than Rp300 trillion or almost equivalent to 20 billion US dollars in state savings. The funds will be allocated to be managed by Danantara to be invested in 20 or more national projects.

The first wave of investment in Danantara will also come from the State Budget with a value of 20 billion US dollars. According to Prabowo, it will be focused on nickel, bauxite, copper downstream projects, data center and artificial intelligence development, oil refineries, petrochemical plants, food and protein production, aquaculture, and renewable energy.

"High-impact projects, which will create significant added value for our nation. Those are the sectors that will determine our future, the resilience and independence of our nation," Prabowo said in his speech.

The full utilization of the budget efficiency results for Danantara is different from the goals that have been conveyed by the government. Previously, the government said that the results of the cuts would be used for Prabowo's priority programs that have a direct impact on the community. Among them are for Free Nutritious Meals (MBG), food security, and school renovation.

Executive Director of the Center of Reform on Economics (CORE) Indonesia, Mohammad Faisal, said that the reduction in government spending due to APBN efficiency will reduce the fiscal driving force on the wheels of the economy.

Several sectors such as transportation, MICE (meetings, incentives, conferences, and exhibitions), and hospitality have begun to be affected by the government's budget cuts. This is because the efficiency policy targets spending on goods in ministries/agencies such as official travel, meetings and seminars, and other ceremonial events.

Ideally, Faisal continued, when several sectors are hit by the efficiency policy, the government can balance the movement of the economic wheels in other sectors that are driven by the reallocation of the results of budget cuts.

In other words, the results of budget efficiency should be reallocated to programs that not only impact the welfare of the community. The results of efficiency should also be able to move the wheels of the economy in various other sectors.

However, according to Faisal, the government decided to invest the funds from the efficiency in Danantara, the benefits of which will most likely only be felt in the long term. Moreover, the governance of the new agency is also questionable because he considers it to lack transparency and accountability.

Danantara, for example, cannot be audited by the Audit Board of Indonesia and the Financial and Development Supervisory Agency (BPKP) except with the request and permission of the House of Representatives (DPR).

"Can Danantara provide maximum benefits to the economy if it is managed with poor management? Even if it is managed properly, the benefits will be more long-term. Meanwhile, the losses due to efficiency policies have clearly occurred now. So, there is a gap here which is a risk that we must bear," said Faisal.

CORE estimates that economic growth in 2025 will fall below 5 percent. CORE initially estimated that Indonesia's economy would grow in the range of 4.8-5.0 percent in 2025. The prediction was issued in late 2024 before the budget efficiency policy was implemented starting this year.

"Even without budget efficiency, our prediction is that the economy will not grow higher than last year. Moreover, coupled with various policies such as budget efficiency which now have the potential to add pressure to the economy," he said.

Indonesian Forum for Budget Transparency (FITRA) researcher Gurnadi Ridwan said that the results of efficiency should have an impact on public welfare. As long as it is truly managed transparently and accountably, Danantara can actually achieve that goal. However, the benefits will only be felt in the long term.

The benefits can come back in the form of investment and development projects that create broad employment opportunities for the community. It can also be in the form of increasing state revenues through both taxes and non-taxes (PNBP).

"As an idea, it's okay. But the results can only be enjoyed later. It's still a very long term. However, that is on the condition that Danantara succeeds and brings in 'money'," he said.

As a result, for the time being, macroeconomic growth will be eroded. "There will definitely be sectors that are hampered by efficiency policies. However, when we 'sacrifice' one sector due to efficiency, we must have another sector to rely on so that our economy is not really hit," said Gurnadi.

Contacted separately, Deputy Chairman of the DPR Budget Agency from the Gerindra Party Faction, Wihadi Wiyanto, said that the government will return some of the results of the budget efficiency to a number of K/L. The plan is that Rp 58 trillion will be returned to 17 K/L, although it is not yet known which K/L.

According to him, the returned budget can be used to implement priority programs and spending that are directly related to the livelihood of the community.

"Those will be the programs assigned by Mr. Prabowo to be implemented. So later some of the efficiency results will be returned to the ministry according to performance and assignment," he said.