Jakarta, Indonesia Sentinel — Indonesia’s ambitious plan to relocate its capital to Nusantara (IKN) has hit another roadblock due to significant budget cuts in the 2025 State Budget (APBN). As a result, no substantial progress is expected in the near future.
Minister of Public Works and Housing (PU), Dody Hanggodo, confirmed the stalled funding while speaking at the Parliament Complex in Jakarta on Thursday (February 6, 2025).
“The IKN budget has not been allocated yet. As I mentioned earlier, our budget is currently blocked. How can we talk about progress when there’s no funding?” Dody stated.
The budget cuts follow Presidential Instruction (Inpres) No. 1 of 2025, which mandated a reduction of IDR 81.38 trillion ($5.2 billion) in the Ministry of Public Works’ funding. This has directly impacted the capital relocation project, which was a flagship initiative of President Joko Widodo.
Dody even made a lighthearted remark regarding the budget constraints, joking that the only progress seen in the budget allocation was for covering the minister’s lunch expenses.
Government Prioritizes Other Programs
With the capital relocation funds currently frozen, the Public Works Ministry has decided to shift its focus to other urgent programs, particularly the preparations for the 2025 Eid al-Fitr transportation system.
“We need to take things one step at a time. Once the budget is released, we will revisit the plans. Right now, the most immediate priority is ensuring smooth transportation for Eid. After that, we’ll see what comes next,” Dody explained.
Despite the funding challenges, the government had previously reported notable progress in IKN’s construction. During a parliamentary hearing, Dody stated that by the end of 2024, the physical development of Nusantara had reached 87.9%. Throughout the year, the project absorbed a total budget of IDR 40.29 trillion ($2.6 billion).
“As of December 31, 2024, physical progress in IKN had reached 87.9% of the total allocated budget for that year,” he reported.
Read Also:
Indonesia Weather Alert! High Flood Warnings Issued Across Indonesia for February 2025
Delays Could Affect Inauguration Plans
The delay in budget disbursement raises concerns over the timeline of the new capital’s development. Initially, the government aimed to inaugurate the first phase of IKN in August 2024, coinciding with Indonesia’s Independence Day celebrations. However, persistent financial constraints have hampered progress, making it unclear whether the relocation schedule can be maintained.
The Nusantara capital project was envisioned as a long-term solution to Jakarta’s overpopulation, chronic flooding, and environmental degradation. The government promoted IKN as a “smart and sustainable forest city,” designed to decentralize economic growth and reduce Jakarta’s congestion.
However, economic uncertainties, investor hesitancy, and budget reallocations have raised doubts about the project’s feasibility. Critics argue that the capital relocation might become a white elephant if financial challenges persist. The recent budget freeze adds another layer of uncertainty to the already contentious initiative.
Future Outlook
The government has yet to announce when the funding will be resumed, leaving the project in limbo. While officials remain optimistic about Nusantara’s future, the current fiscal constraints suggest that its full realization may take longer than initially projected.
As Indonesia navigates economic priorities, the fate of Nusantara remains uncertain. Whether it will proceed as planned or face further setbacks depends largely on political will, economic recovery, and potential investor confidence in the ambitious endeavor.
(Becky)
