Jakarta. The Constitutional Court ruled that the government must separate funding for the Free Nutritious Meals (MBG) program from the national education budget by the time it drafts the 2028 State Budget (APBN), prompting economists to call for fiscal adjustments starting in 2027.

Syafruddin Karimi, an economist at Andalas University, said the 2027 state budget should serve as a genuine transition period rather than a delay until the court's deadline.

He said the MBG program should be funded under its own budget, while the constitutional requirement that education spending account for at least 20% of state expenditure should be calculated only after MBG spending is excluded.

The government should also prepare a medium-term financing framework covering projected beneficiaries, per-meal costs, food inflation, logistics needs, regional fiscal impacts, and permanent funding sources.

"If fiscal capacity is insufficient, the government should recalibrate the program by prioritizing children from poor and vulnerable families, regions with severe nutrition problems, and underdeveloped areas. More targeted implementation can preserve the program's social benefits without placing excessive pressure on the state budget," Syafruddin said in a statement on Friday.

Syafruddin said that the court's decision corrects the government's expenditure classification while making the fiscal cost of the MBG program more transparent after it had previously been embedded within the education budget.

Under the 2026 state budget, education spending totals Rp 769.1 trillion ($46.6 billion), including Rp 223.6 trillion allocated to the MBG program. Excluding the meals program leaves Rp 545.5 trillion for education, equivalent to only 14.2% of total state spending—below the constitutional minimum of 20%.

Syafruddin said maintaining economic stability will depend on financing both commitments through sustainable government revenue, clear spending priorities, a credible fiscal deficit, and prudent debt management.

"Compliance with the Constitutional Court's ruling is not merely a legal obligation. It is a test of budget transparency, fiscal discipline, protection of education rights, and the credibility of national economic management," he said.

He warned that the ruling will have significant fiscal implications, forcing the government to balance higher revenue collection, spending reallocations, adjustments to the scale of the MBG program, the use of budget surpluses, and additional borrowing.

An overly aggressive tax increase, he said, could weaken consumption and investment, while spending cuts risk reducing funding for healthcare, social protection, infrastructure, food security, regional transfers, and disaster mitigation. Relying on budget surpluses would provide only temporary financing for a recurring program, while additional debt could widen the fiscal deficit, increase government bond issuance, raise interest costs, and reduce fiscal space for productive spending.

"These risks become even more significant when the fiscal deficit is already approaching the legal ceiling of 3% of GDP, government bond yields remain elevated, and state revenues are not yet strong enough to support all priority programs," Syafruddin said.

He added that financing the MBG program through excessive borrowing could increase Indonesia's fiscal risk premium, push up government bond yields, and add pressure on the rupiah.

Syafruddin said that investors assess not only the country's debt-to-GDP ratio but also the quality of public spending, the credibility of fiscal deficit management, the government's ability to service interest payments, and its commitment to complying with constitutional rulings.

Higher government borrowing costs would eventually feed through to lending rates, dampen private investment, slow economic growth, and increase the burden on Bank Indonesia to maintain macroeconomic stability. At the same time, an overly expansionary fiscal policy could fuel demand for food, drive inflation in certain commodities, and complicate fiscal-monetary coordination if production and distribution capacity fail to keep pace.

"If investors believe the government is expanding the program without a clear and sustainable funding source, they will demand a higher risk premium," Syafruddin said.

Moody's Ratings has previously warned that Indonesia's flagship MBG program could add to fiscal risks as the government ramps up social spending alongside affordable housing initiatives. The agency said expanding expenditure without durable revenue gains could widen the fiscal deficit despite ongoing efforts to improve tax and customs collection.

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