Indonesia Slashes Free School Meals Budget by 35% as Fiscal Concerns Take Center Stage

[Updated at 5:45 p.m. on July 7, 2026, to include the National Nutrition Agency's (BGN) response to the proposed 2027 budget reduction.]

JAKARTA, Investortrust.id — Indonesia will cut spending on its flagship Free Nutritious Meals (MBG) program by more than one-third in 2027, marking the clearest sign yet that President Prabowo Subianto's administration is recalibrating one of its most closely watched fiscal initiatives.

The House of Representatives' Budget Committee (Banggar) said funding for the nationwide program will fall to Rp174 trillion ($10.9 billion) in 2027 from Rp268 trillion ($16.9 billion) this year, a reduction of 35.1%.

The MBG program has become one of the most closely scrutinized elements of Indonesia's fiscal policy. Since President Prabowo introduced the initiative, foreign investors, sovereign bond investors, ratings agencies, and domestic asset managers have questioned whether the government could finance such an ambitious social spending program without weakening fiscal discipline.

Concerns over MBG have frequently surfaced during investor meetings because the program represents one of Indonesia's largest new recurring expenditure commitments. Investors have been closely watching whether the government would need to widen the fiscal deficit, increase borrowing, or reduce spending elsewhere to finance the initiative.

The latest budget reduction is therefore likely to be interpreted as a signal that policymakers are prioritizing fiscal sustainability alongside social policy objectives.

Speaking at Parliament on Tuesday, Said Abdullah, chairman of the House Budget Committee, said the revised allocation would prioritize serving 84 million students through approximately 21,000 nutrition service centers, down from the previous target of 27,000 kitchens.

"A reduction from Rp268 trillion to Rp174 trillion is significant," Said told reporters at the parliamentary complex in Jakarta on Tuesday.

He said the lower budget is intended to preserve nutritional standards while improving program governance rather than reducing food quality.

"With this reduction, the quality will remain well maintained," Said said.

Fiscal Discipline

The budget revision follows earlier comments from Finance Minister Purbaya Yudhi Sadewa, who revealed that the government had been working with the National Nutrition Agency (BGN) to improve efficiency within the program.

Speaking after a meeting with BGN officials in late June, Purbaya said the government had identified substantial savings.

"There will be further efficiencies in the MBG program. I think they are quite significant," Purbaya said.

He also stressed that efficiency measures would not reduce the nutritional value of meals served to beneficiaries.

"The per-meal allocation remains unchanged. We are making sure the food remains nutritious," Purbaya said.

The government's fiscal adjustment appears designed to improve program efficiency rather than scale back its overall objectives. According to the Ministry of Finance's May budget report, MBG spending had reached Rp88.15 trillion ($5.5 billion) by the end of May, benefiting 63.13 million people through 29,670 nutrition service centers, including 48.9 million students and 14.3 million non-student beneficiaries.

Poultry Firms' Fundamentals Remain Intact

For equity investors, analysts believe the lower budget is unlikely to materially alter demand for agricultural commodities.

Research from BRI Danareksa Sekuritas (BRIDS) concluded that the reduction would have only a modest impact on Indonesia's poultry industry. The brokerage estimates the country's projected chicken supply shortage would narrow only slightly—from 12% to 11%—leaving the sector's long-term fundamentals largely intact.

BRIDS continues to maintain an Overweight rating on Indonesia's poultry sector, with PT Charoen Pokphand Indonesia Tbk (CPIN) remaining its top pick, alongside PT Japfa Comfeed Indonesia Tbk (JPFA) and PT Malindo Feedmill Tbk (MAIN).

While the immediate implications for listed poultry producers appear limited, the broader significance of the budget adjustment lies in fiscal policy. For global investors, the move signals that the government is willing to recalibrate its flagship spending program to safeguard Indonesia's fiscal credibility—a key consideration for both equity and bond markets.

National Nutrition Agency Declines Comment on Budget Cut

Indonesia's National Nutrition Agency (BGN) declined to comment on parliament's decision to reduce the 2027 budget for the Free Nutritious Meals (MBG) program to Rp174 trillion ($10.9 billion) from Rp268 trillion ($16.9 billion).

Speaking after a meeting with Indonesia's Corruption Eradication Commission (KPK) on Tuesday, Deputy Head and BGN spokesperson Agustina Arumsari said the agency was focused on improving the program's governance rather than discussing funding.

"We'll discuss the budget at the appropriate time. Today's agenda is following up on the KPK's recommendations," Agustina told reporters after the meeting.

BGN submitted an action plan to implement 10 governance recommendations issued by the KPK in March. The measures include improving beneficiary data, strengthening payment mechanisms, and tightening oversight to reduce the risk of budget leakages and ensure the program reaches its intended recipients.

The comments came hours after Budget Committee Chairman Said Abdullah confirmed that lawmakers had agreed to cut the MBG budget by 35% for 2027 while narrowing the program's operational scope to 21,000 nutrition service kitchens serving 84 million students.