Jakarta. Indonesia is spending hundreds of trillions of rupiah on flagship programs as economists raise concerns over weak job creation, a shrinking middle class and mounting fiscal pressures, questioning whether President Prabowo Subianto's economic agenda is generating sufficient returns from increasingly costly government spending.

Less than two years into Prabowo's presidency, Indonesia has already had three finance ministers. Bank Indonesia has also undergone a leadership change, with Destry Damayanti succeeding Perry Warjiyo as governor in September.

Yet economists argue that the underlying fiscal challenge remains: expensive government programs are expanding while Indonesia's capacity to generate additional revenue remains constrained.

Prabowo has repeatedly promoted the Free Nutritious Meals (MBG) program as an economic engine capable of creating jobs and raising incomes for farmers, fishermen and small businesses. His administration has made similar claims about the Merah Putih Village Cooperatives program, which seeks to establish more than 80,000 cooperatives nationwide.

By early August, the government had disbursed Rp 101.1 trillion ($5.6 billion) for MBG, reaching 63.13 million beneficiaries.

Critics, however, question whether such spending is generating sufficient economic returns, particularly as the meal program has also faced repeated food-poisoning incidents and a major corruption investigation.

Lili Yan Ing, secretary general of the International Economic Association, argues that MBG should target low-income families rather than provide meals on such a broad scale.

“Providing the program universally, as is the case now, amounts to budget waste and becomes a burden on the people,” Lili said, advocating targeted cash transfers or food vouchers instead.

The government has allocated Rp 240.2 trillion to the National Nutrition Agency for 2027, including Rp 232.5 trillion specifically for MBG, targeting about 72.46 million beneficiaries.

Lili argued that a targeted version could operate on roughly Rp 8 trillion annually, based on a model covering around 3 million children for 200 school days. She said savings could instead finance teacher salaries and training, school renovations, textbooks, scholarships and other productive spending.

“The state must be there for the poorest. That is its real role: ensuring access to health care, education and job creation,” she said.

She also called for a reassessment of the village cooperative program and cuts to unnecessary overseas trips and ceremonial spending.

Fiscal Pressure
Indonesia's state budget recorded a Rp 240.1 trillion deficit through August, equivalent to 0.93% of GDP. The government expects the deficit to widen substantially by year-end as spending accelerates, although the Finance Ministry maintains that it will remain below the statutory ceiling of 3% of GDP.

Fiscal pressures are expected to remain substantial in 2027. Lili estimated government principal and interest payments at around Rp 804 trillion, or 23.5% of projected state revenue, potentially limiting room for other development priorities.

Questions over Quality of Growth
Concerns extend beyond government spending to the quality of Indonesia's economic expansion.

Paramadina University economist Wijayanto Samirin said growth had failed to generate enough quality jobs or significantly strengthen the middle class.

“There is an increasingly wide gap between the reality experienced by the public and the government's narrative of success,” Wijayanto said.

He also questioned Prabowo's ambition of achieving 8% economic growth by 2029, arguing that government spending and state-owned enterprises alone cannot generate such expansion.

“It is difficult to achieve high growth if we rely solely on government programs and state-owned enterprises,” he said.

Wijayanto called for a better investment climate, simpler regulations, tax incentives and stronger protection for businesses against intimidation and criminalization.

He warned that continued deindustrialization and the expansion of informal employment could weaken productivity and reduce the availability of quality jobs.

Lili similarly argued that government policy should focus more heavily on productivity, private investment, employment and infrastructure in less-developed regions.

Add as a preferred source on Google +