JAKARTA (Reuters) – Indonesia’s outgoing government submitted a 2025 budget plan to parliament on Friday targeting a narrower deficit than this year, which analysts said signalled Southeast Asia’s largest economy would remain fiscally prudent under its next president.
The projected 2025 deficit in president-elect Prabowo Subianto’s first budget, at 2.53% of GDP, would be smaller than the 2.7% gap expected this year.
The budget proposal is worth 3,613.1 trillion rupiah ($230 billion). It targets revenues at 2,996.9 trillion rupiah.
Below are details of the proposal:
BOND ISSUANCE
To plug the fiscal gap, the government would issue bonds worth 642.6 trillion rupiah ($41 billion), up from 451.9 trillion rupiah this year, excluding debt rollover and short-term notes.
In 2024, fiscal authorities slashed the bond issuance target in response to market volatility. Excess cash from 2023 was used to help cover the fiscal gap.
Next year, the government would prioritise offering rupiah-denominated bonds.
TAX POLICY
Indonesia is by law scheduled to raise its value-added tax (VAT) rate by one percentage point to 12%, but the proposal did not mention this.
Current finance minister Sri Mulyani Indrawati said the revenue target took into account potential new areas of taxation, but she declined to comment on the VAT rate.
The proposal included a plan for imposing excise tax on packaged sugary drinks, without providing details.
FREE SCHOOL MEALS
Prabowo’s flagship Free Nutritious Meals programme was budgeted at 71 trillion rupiah in 2025, unchanged from previous announcements, and was expected to contribute 0.1 percentage point to GDP growth.
To be implemented in stages, the programme would reach 20 million recipients in its first year, out of a target to eventually reach more than 80 million children and pregnant women.
It would start in regions with high rates of poverty and stunted child growth, with meals either supplied by small local businesses or provided from central kitchens.
FOOD SECURITY SPENDING
A total of 124.4 trillion rupiah was proposed for food security programmes, another of Prabowo’s key campaign promises, including for the expansion of paddy and corn fields and fertilizer subsidies.
Subsidies would be increased to fund the distribution of 9 million metric tons of fertilizers, up from 6 to 7 million in 2024, Sri Mulyani said in a news conference.
INFRASTRUCTURE SPENDING
The 2025 budget proposal includes a 400.3 trillion rupiah allocation for infrastructure, down 5% from this year.
A big chunk of the allocation would go towards improving infrastructure that supports food production to reflect Prabowo’s policy focus, Sri Mulyani said.
Only a fraction of the budget, 143.1 billion rupiah, would be alloted for the ongoing construction of Indonesia’s new capital city.
ENERGY SUBSIDIES
The proposal called for reform of the government’s energy subsidy policy, moving away from blanket subsidies to targeted distribution to individual beneficiaries.
The energy subsidy bill was proposed at 204.5 trillion rupiah, compared with 192.8 trillion rupiah this year.
DEFENCE SPENDING
A total of 165 trillion rupiah was proposed for defence spending, down from 175 trillion rupiah expected for 2024.
UNDERLYING BUDGET ASSUMPTIONS:
BUDGET ASSUMPTIONS 2025 2024
Proposal Outlook
Economic growth(%) 5.2 5.1
Inflation (%) 2.5 2.7
10-year bond yields (%) 7.1 6.9
Rupiah exchange rate/$ 16,100 16,000
Indonesia crude price/barrel 82 82
Oil lifting (bpd) 600,000 596,000
Gas lifting (boepd) 1.005 mln 995,000
($1 = 15,685.0000 rupiah)
(Reporting by Jakarta bureau; Editing by Hugh Lawson)
