Fiscal Friction: Dual Leadership’s Ambitions Threaten the State Budget

Chessboard, Rivalry

  • The government is reviewing all subsidy programs to assess their benefits and changing the subsidy distribution schemes deemed ineffective, inefficient, and not well-targeted, such as fuel and LPG subsidies.
  • Although budget disbursement has reached 83.7 percent of the state budget ceiling for the IKN, with no sign of private sector investment, it is almost certain that the new capital city project will further drain the state budget.
  • Prabowo wants free lunches as a "priority electoral program" because the policy has electoral impact, and the development of TNI strength as a "priority legacy policy" because he wants to leave a legacy as a president who successfully restored the TNI as a respected military power in the southern hemisphere.
  • With a tight budget, an idea emerged to "cut the Gordian Knot" by changing the mandatory limit of the state budget deficit regulated by the law. The three percent deficit limit is essentially a request from the Paris Club back when Indonesia was still a debtor to the club of wealthy nations.

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