Tenggara Strategics, Jakarta – President Joko "Jokowi" Widodo has been trying to facilitate a smooth transition of power for his successor Prabowo Subianto by various means, but accommodating Prabowo's signature programs in the 2025 budget has proven to be the most challenging considering the narrowing fiscal space and economic deceleration.
To encourage a smooth transition, President Jokowi facilitated the amendment of the 2008 Ministry Law by removing the limitation on the number of ministries to 34 to allow Prabowo to expand the number of ministerial posts to over 45 or even 50 to accommodate more political parties into Prabowo's coalition.
President Jokowi has appointed Prabowo's men to various strategic positions, including to deputy finance minister, to ensure that Prabowo's programs are accommodated in the 2025 budget. During a recent meeting with a Finance Ministry team to draft the 2025 budget, President Jokowi told the team to accommodate all of Prabowo's programs.
So far, the Finance Ministry has included Prabowo's signature free school lunch program, with a budget of Rp 71 trillion (US$4.4 billion). The expansion of the number of ministerial posts under Prabowo will result in a larger budget.
Even before the number of ministries are expanded, the House budget committee recently passed on to the Finance Ministry an additional budget of Rp 598.9 trillion that the committee compiled from requests by various ministries and state institutions for budget increases.
Such requests of budget increases will most likely not be accommodated in the 2025 budget considering the narrowing fiscal space because of the Rp 800 trillion of government debt that will mature in the next year, comprised of Rp 705.5 trillion in government bonds and Rp 94.8 trillion in debt. The total budget for 2024 is Rp 3.32 quadrillion.
At the same time, the government is constrained by the 2003 State Finance Law that limits the maximum budget deficit to 3 percent. Finance Minister Sri Mulyani Indrawati stated that the budget deficit for 2025 is estimated to be between 2.29 and 2.82 percent as 2025 will see expanding revenue.
However, achieving next year's revenue target will be hard under the economic slowdown. The Indonesian economy is weakening as household purchasing power weakens along with a declining middle-class population in the past few years, from 60 million people in 2018, or 23 percent of the total population, to 58 million people in 2023.
Indonesia's economic deceleration is coupled with the global economic slowdown. There is a rising concern that recession in the United States is likely. The increasing geopolitical tensions in the Middle East are driving up oil prices worldwide, which will further strain Indonesia's 2025 budget.
What we've heard
Several government sources say that several close associates of Prabowo Subianto been frequently meeting with officials from various Ministries, including Bappenas, since long ago.
Rumors have spread wide regarding the outcome of these meetings, claiming that the free nutritious lunch budget will be allocated through the budget of ministries and public agencies. The free nutritious lunch budget will be distributed as part of various Ministries and agencies. That is why, according to a source, the 2025 State Budget (APBN) will be crafted to be as flexible as possible.
For example, through the Defense Ministry's budget, the TNI's babinsa will be tasked with providing public kitchens to support the free lunch program. The aim is to ensure that the free lunch program is realized. These public kitchens would be mandated to provide nutritious meals for free.
Jokowi asked Finance Minister Sri Mulyani to oversee and accommodate Prabowo-Subianto's flagship programs, including but not limited to free nutritious lunches, throughout the planning of the 2025 draft state budget (RAPBN). That's why Thomas Djiwandono, now Deputy Minister of Finance, has been seen travelling back and forth meeting with Finance Ministry officials.
[This content is provided by Tenggara Strategics in collaboration with The Jakarta Post to serve the latest comprehensive and reliable analysis on Indonesia's political and business landscape.]