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Prabowo to keep 3 pct budget deficit cap despite free lunch program

Jakarta Globe - May 16, 2024

Jayanty Nada Shofa, Jakarta – President-elect Prabowo Subianto recently revealed he had no plans of raising the 3 percent budget deficit cap to accommodate his flagship policy of feeding schoolchildren free lunches.

Prabowo is planning to provide free lunches and milk for students as a means to cut the country's stunting rate. His incoming government will also distribute nutritional aid to toddlers and pregnant women across the archipelago. But this ambitious program has raised questions about how the government would fund the program without overspending.

Indonesia has been keeping a mandatory state budget deficit cap of 3 of the gross domestic product (GDP). Finance Minister Sri Mulyani last month said the government had agreed to keep this 3 percent cap on the 2025 state budget. Prabowo – who will officially take office this October – told the recent Qatar Economic Forum that he would also keep this limit despite the free lunch program.

"We have studied this. We have studied all the figures. We are very confident we can do that. ... The 3-percent [budget deficit cap] is something arbitrary, and not many countries can hold on to that. We have a tradition of prudent fiscal management," Prabowo said while claiming that Indonesia had one of the world's lowest debt-to-GDP ratios.

The government report shows that as of 2023, Indonesia's debt-to-GDP ratio stood at approximately 38.6 percent.

Prabowo then went on to say that his government would be daring on its spending with good governance, and without raising the limit beyond 3 percent. This includes spending less on what he calls "non-essential activities". Prabowo did not specify what sort of activities he considered unnecessary.

"We will calculate [things]. It is a matter of refocusing, cutting down the waste, and cutting down the allocation to non-essential activities. It is a matter of efficient, good governance, good administration, and good management," Prabowo said.

According to Prabowo, the incoming government would embrace a digital public procurement system – better known as the e-catalog. He will also ramp up digital adoption within the government to increase tax ratio and revenue services.

Earlier this year, Chief Economic Affairs Minister Airlangga Hartarto said the proposed budget for the free school lunch program would be Rp 15,000 (approximately less than $1) per child each day. However, this expected spending does not include the costs of buying milk.

According to Prabowo's manifesto, the free school meal initiative, coupled with pregnant women's nutritional support, will reach 80 million people. Prabowo is aiming for a 100-percent coverage rate by 2029.

Source: https://jakartaglobe.id/business/prabowo-to-keep-3-pct-budget-deficit-cap-despite-free-lunch-progra