President Prabowo Orders Budget Cuts, Rp306.69 Trillion Slashed

President Prabowo Subianto has issued a directive to streamline the national budget through Presidential Instruction (Inpres) No. 1 of 2025 on Spending Efficiency in APBN Implementation. This measure aims to reduce state expenditures by Rp306.69 trillion to support key government programs.

The two main areas targeted for cuts include ministerial and institutional (K/L) expenditures amounting to Rp256.1 trillion and regional transfer funds (TKD) reduced by Rp50.59 trillion.

Finance Minister Sri Mulyani Indrawati stated that the budget efficiency is essential to fund government priority programs, including the Free Nutritious Meals (MBG) initiative.

"The President has instructed that the budget be allocated more efficiently, prioritizing programs that directly benefit the public, such as Free Nutritious Meals," Sri Mulyani said at a press conference at the Ministry of Finance on Friday (Jan 24).

Budget Cuts Impact Ministries and Workforce

The spending cuts have begun to affect various ministries. The Ministry of Villages and Development of Disadvantaged Regions saw its budget slashed by Rp722.73 billion, including reductions in funding for village facilitators’ salaries.

However, Minister Yandri Susanto assured that village facilitators would still receive their full-year salaries, though the current budget only covers 10 months of payments.

Similarly, the Ministry of Transmigration (Kementrans) faces a Rp50 billion shortfall in employee salaries due to the budget reductions. Minister Iftitah Sulaiman Suryanagara reported that the ministry initially had a budget allocation of Rp122.4 billion, but after cuts, only Rp43.16 billion remains.

Moreover, approximately 18,000 contract employees at the Ministry of Public Works (PU) are also affected following an 80% budget cut, amounting to Rp81.38 trillion. Minister Dody Hanggodo explained that contract renewals have been put on hold as the ministry awaits budget evaluations.

Economic Implications of Budget Reductions

The large-scale budget cuts have raised concerns about their impact on the national economy. M. Rizal Taufikurahman, Head of Macroeconomics and Finance at Indef, warned that reallocating funds to other priority programs could lead to rising unemployment and weakened domestic consumption.

"This situation could lower consumer purchasing power and slow down domestic spending, which is the primary driver of Indonesia's economy," Rizal told CNNIndonesia.com.

Additionally, the budget cuts in strategic sectors such as Public Works (PU) may hinder infrastructure projects, which have historically been a key pillar of economic growth.

Economist Shofie az Zahra from IDEAS noted that while the Free Nutritious Meals (MBG) program could boost local agricultural production and food distribution, it might not offset the widespread effects of budget reductions in other sectors.

"When thousands of contract workers lose their jobs, household spending declines sharply, impacting retail, transportation, and service industries," she explained.

Shofie further cautioned that if the budget cuts extend to infrastructure and public services, Indonesia’s long-term economic competitiveness could be at risk. To mitigate these risks, she emphasized the need for a more balanced fiscal strategy to ensure that budget efficiencies do not lead to deeper economic slowdowns.

Temukan berita dan artikel lainnya di Google News