Jakarta, Indonesia Sentinel — Indonesian President Prabowo Subianto has taken a decisive step toward fiscal efficiency by issuing Presidential Instruction (Inpres) No. 1 of 2025. The directive mandates budget reductions totaling Rp 306.69 trillion ($20 billion) for the 2025 fiscal year, targeting ministries, government agencies, and regional administrations.
The cuts comprise Rp 256.1 trillion ($16.7 billion) from ministerial and agency budgets, with the remaining Rp 50.59 trillion ($3.3 billion) deducted from transfers to regional governments. The Inpres, signed on January 22, 2025, underscores the government’s commitment to optimizing public spending amid economic challenges.
Key Areas for Budget Reduction
The directive requires all ministers, agency leaders, and regional heads to identify potential budget efficiencies in both operational and non-operational spending. Specific areas include office operations, maintenance, travel expenses, government assistance programs, infrastructure projects, and procurement of equipment. However, the directive explicitly excludes cuts to personnel expenses and social welfare programs.
The government has prioritized avoiding reductions in spending funded by external loans, grants, or other specific sources, such as revenues from state-owned enterprises or Islamic financial instruments like State Sharia Securities (SBSN).
Regional Spending Limitations
The Inpres imposes strict limitations on regional spending. Governors, mayors, and regents are instructed to reduce ceremonial activities, studies, seminars, and focus group discussions. Travel expenses must be reduced by 50%, and honorariums for task forces and committees are to be limited by adopting stricter regulations. Additionally, regional administrations must focus their budgets on measurable public service outcomes rather than replicating previous years’ spending patterns.
Process and Deadlines
Ministers and agency leaders are required to finalize their efficiency plans and submit them to their respective parliamentary oversight committees for approval. Once approved, these proposals must be forwarded to the Ministry of Finance by February 14, 2025. The proposals must specify budget reductions in blocked funds, ensuring transparency and accountability.
For regional governments, adjustments to budgets sourced from central government transfers are also mandated. Prabowo has emphasized the need for selective allocation of grants and strict compliance with the revised spending guidelines.
Balancing Budget Cuts with Public Services
Despite the substantial reductions, the directive underscores the importance of maintaining essential public services. By targeting non-essential expenditures, the government aims to ensure that critical sectors such as education, healthcare, and infrastructure development remain unaffected.
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Broader Implications
This move aligns with Prabowo’s broader agenda to streamline Indonesia’s fiscal policies and enhance economic resilience. The Inpres reflects the administration’s response to post-pandemic economic challenges and the need for efficient resource allocation.
As Indonesia aims to balance fiscal discipline with economic growth, these measures could serve as a test of the government’s ability to optimize public spending while addressing the needs of its 270 million citizens.
(Becky)
