DIGIVESTASI - The government and the Indonesian House of Representatives (DPR RI) held a series of marathon meetings to discuss the 2025 State Budget (APBN), which will be the first year of President-elect Prabowo Subianto's administration. The main focus of the discussion was the 2025 APBN deficit. Interestingly, the heated debate occurred not between the DPR and the government, but within President Joko Widodo's (Jokowi) administration itself.

Initially, in the Macro Economic Framework and Principal Fiscal Policy (KEM-PPKF), the government targeted a deficit range of 2.45% to 2.82% of the gross domestic product (GDP), as conveyed by Finance Minister Sri Mulyani Indrawati. However, during a Working Meeting with Commission XI of the DPR on Wednesday (5/6/2024), a plan emerged for a 2025 APBN deficit of 1.5%.

Minister of National Development Planning/Head of Bappenas, Suharso Monarfa, independently stated that the government could reduce the deficit even further. "We hope the Minister of Finance and Commission XI can agree on lowering the deficit further between 1.5%-1.8%," he said on Wednesday (5/6/2024).

According to Suharso, a deficit below 2% would provide sufficient fiscal space for President-elect Prabowo Subianto-Gibran Rakabuming to implement their programs. He emphasized the importance of fiscal space so that the new government can manage the budget according to its priorities. Suharso proposed cutting the budget of Ministries/Agencies (K/L) to reduce the deficit to the range of 1.5%-1.8% of GDP.

Meanwhile, the budget deficit realization in 2023 was recorded at Rp347.6 trillion or 1.65% of GDP, and this year's deficit is targeted at around 2.8%. PDIP faction member Edy Wuryanto, on a separate occasion, requested that next year's APBN be planned to achieve a surplus, "The deficit should be directed towards a budget surplus or a 0% deficit," he said on Tuesday (28/5/2024).

Economist from the Center of Economic and Law Studies (Celios), Nailul Huda, considers Sri Mulyani's proposed deficit, which is almost at the upper limit of 3%, as a message for the new government to be cautious. In addition to the impact of a weakening rupiah exchange rate affecting debt financing, the large APBN expenditure for next year's programs is also a challenge. Ambitious programs such as IKN, PSN, and free lunches need to be reconsidered.

Nailul suggested an evaluation of the infrastructure budget, noting that much can still be cut from President Jokowi's era. Rationalizing the new president's ambitious programs, such as providing nutritious meals, is also necessary. "I think SMI [Sri Mulyani Indrawati] wants to convey that [Prabowo] should be careful in managing state debt," he told Bisnis on Sunday (9/6/2024).

Suharso suggested reducing K/L spending to lower the deficit. President-elect Prabowo Subianto has also signaled a reduction in the IKN budget, planning to allocate only Rp16 trillion per year for the development of the legacy area from Jokowi, different from the last three years which have channeled Rp72.3 trillion.

However, Prabowo also has political promises such as free lunches, which will burden the APBN up to Rp400 trillion. With these various challenges, the question that arises is, which path will the government take: reducing the deficit by cutting expenses, seeking additional revenue, or increasing debt?

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