Indonesia’s Prabowo Orders $19.7 Billion in State Spending Cuts to Rein In Budget
JAKARTA, investortrust.id—President Prabowo Subianto has mandated sweeping cuts to Indonesia’s state and regional budgets under a new austerity directive, targeting savings of up to Rp 306.69 trillion ($19.7 billion) this year to curb fiscal strain while shielding salaries and welfare programs.
Presidential Instruction No. 1 of 2025, effective Jan. 22, orders ministries, agencies (K/L), and regional governments to slash 256.1 trillion rupiah from central spending and Rp 50.59 trillion from regional transfers (TKD). The measures exempt employee wages and social aid but target operational costs, travel, infrastructure projects, and equipment procurement.
Finance Minister Sri Mulyani Indrawati will oversee the cuts, prioritizing funds sourced from loans, grants, and non-tax state revenues (PNBP-BLU), excluding those earmarked for Sharia Treasury Bonds (SBSN).
Budget Blocking and Legislative Coordination
Ministries must freeze allocations meeting specific savings targets but require approval from Indonesia’s House of Representatives (DPR) commissions. Agencies granted legislative clearance must report to the Finance Ministry by Feb. 14. Regional governments, meanwhile, face strict limits: a 50% reduction in official travel, caps on honorariums, and bans on ceremonial events, studies, and seminars.
Redirecting Funds to Public Services
The directive urges provinces to prioritize “public service-oriented” spending and align budgets with TKD allocations. Direct grants to central agencies—cash, goods, or services—are also mandated to streamline efficiency.
The move signals Prabowo’s push to stabilize Indonesia’s fiscal trajectory amid rising debt, which reached Rp 8,529 trillion ($546 billion) in 2024. Analysts warn, however, that aggressive cuts risk slowing infrastructure development and economic growth unless paired with targeted revenue reforms.