Indonesia's Budget Cuts Raise Concerns as Various Projects Are Canceled, But Free School Meals Budget Increased

Government’s focus on free school meals amid major budget reductions raises questions about economic impact

Indonesia’s President Prabowo Subianto has recently ordered a significant budget cut, totaling approximately 28 trillion won (306 trillion IDR), which is leading to the cancellation of numerous government projects across various sectors. As reported by the local newspaper Kompas, the government's decision to cut spending has caused substantial reductions in infrastructure investments, educational funding, and research and development (R&D) budgets. However, the one area where funding is increasing is in the free school meals program, a key initiative promised by President Subianto.

The Indonesian government initially planned to raise the value-added tax (VAT) from 11% to 12% this year. This change was expected to generate additional national revenue, but opposition based on concerns about slowing consumer spending led to the suspension of the VAT increase. In light of these concerns, the government is now focusing on reducing national expenditures. As a result, a variety of public projects have been put on hold, including vital infrastructure maintenance and development programs. The Ministry of Public Works, responsible for much of the infrastructure spending, reported a massive 80% reduction in this year’s budget, forcing the cancellation of numerous road and bridge maintenance projects.

Additionally, a wide range of other governmental initiatives, such as educational budgets and R&D programs, are expected to be drastically reduced. Travel and operational expenses for civil servants are also facing cuts, along with new equipment purchases. These cuts are primarily driven by the need to streamline government spending due to decreased revenue from taxes.

Despite the widespread cuts, one notable exception is the free school meal initiative, which was a cornerstone of President Subianto’s presidential campaign. Initially planned with a budget of approximately 100 trillion IDR (around 9 trillion won), the program is being expanded. It is set to provide free meals to 90 million Indonesians, including primary and secondary school students, infants, and pregnant women by 2029. The government has decided to increase funding for this program, aiming to accelerate its roll-out and cover a broader population earlier than originally planned.

Experts are voicing concerns about the economic implications of such a large-scale funding shift. Some believe the focus on free school meals, while valuable, may not provide the same long-term economic benefits as infrastructure investments, which could stimulate economic growth. Professor Zaheeb Rezki, an economics professor at the University of Indonesia, stated that the exact positive impact of free meals on the economy is unclear, but it is unlikely to be as significant as providing better roads and services to citizens. Others, like Kunal Kundu, an economist at Société Générale, expressed worry that prioritizing populist spending could lead to a lack of fiscal discipline, further hurting the nation’s long-term economic stability.

In conclusion, while the Indonesian government's increased spending on free school meals is a laudable social initiative, it has sparked concerns about its potential negative impact on the country's broader economic development. The cancellation of infrastructure projects and other essential public services could undermine the overall effectiveness of the government's fiscal strategy in the long run.