This policy paper evaluates the fiscal trade-offs of Indonesia’s IDR 306.7 trillion budget cuts under Presidential Instruction No. 1/2025. CELIOS supports the intent of improving fiscal discipline but criticizes using savings solely to fund the MBG program. The study finds that universal MBG allocation leads to IDR 64.48 trillion misdirected to wealthy families, while a targeted scheme would cost only IDR 117.93 trillion and deliver greater impact. It also identifies IDR 259.76 trillion in potential surplus from “smart cuts,” recommending reallocation to social safety nets such as PKH, education, health insurance (BPJS), and public transport.
The report further quantifies alternative revenues, IDR 241.63 trillion from progressive taxes (carbon, wealth, and extractive sectors), and advocates trimming nonproductive institutional budgets by IDR 95.1 trillion. CELIOS concludes that smart budget cuts, guided by data and progressive taxation, can promote fiscal justice while enhancing welfare outcomes and reducing inequality.
Bibliography:
Askar, M. W., Fikri, B., Darmawan, J., Muhammad, G. D., & Setiadi, B. M. (2025). Budget Cuts for Fiscal Justice and Public Welfare. Center of Economic and Law Studies (CELIOS).