Prabowo Subianto received over hundreds of thousands of Indonesian voters with the promise of free meals for schoolchildren. However his wide-ranging spending plans have but to persuade buyers that he can afford to supply the nation at giant a free lunch.
Indonesia’s incoming president is contemplating stricter tax enforcement, lowering subsidies, doubtlessly elevating borrowing and even funds cuts for a $32bn new capital to fund his flagship marketing campaign pledge — a nationwide faculty meal programme that’s estimated to value Rp460tn ($28bn).
Prabowo can be eyeing a much bigger cupboard, in accordance with three individuals who had been briefed on inside discussions, pointing to expansionary spending on a number of fronts that might weigh on Indonesia’s fiscal prudence.
It might additionally quantity to a break together with his predecessor Joko Widodo, generally known as Jokowi, who over a decade reworked south-east Asia’s largest economic system, leveraging Indonesia’s huge nickel reserves to place it on the centre of the worldwide provide chain for electrical automobiles.
“The Prabowo administration is more likely to be extra liberal on fiscal spending, given the elevated expenditure wants that his new programmes entail,” stated Maybank analyst Brian Lee. “This contrasts with the extra conservative strategy of . . . the Jokowi administration.”
Prabowo, who campaigned on continuity with the Widodo period, is discussing enlarging the cupboard from 34 portfolios to “anyplace between 40 and 43” when he takes workplace in October, one of many individuals stated.
The variety of co-ordinating ministries — which oversee different ministries — will rise from the present 4, and “among the current ministries can be spun off from one another”, the individual stated.
Prabowo might set up a separate physique — both a full ministry or an company — to supervise the meals programme. He’s additionally contemplating establishing a separate state income company to spice up tax assortment.
A few of the new posts are being created to “accommodate requests from coalition companions”, one of many individuals stated. Whereas Prabowo received a decisive victory in Indonesia’s presidential election in February, his parliamentary alliance fell wanting a majority, and is now in talks with potential coalition companions.
However a much bigger authorities will enhance operational bills, and the administration faces few straightforward methods to boost its fiscal headroom, analysts stated.
“The federal government doesn’t appear to have a lot room to boost its present expenditure with out growing the fiscal deficit,” stated Thomas Rookmaaker, head of Asia-Pacific Sovereigns at Fitch Scores.

The individuals acquainted with the discussions stated Prabowo’s crew would depend on a mixture of upper tax income, potential cuts to subsidies and gross sales of state belongings. The federal government offers subsidies for gas, electrical energy and cooking oil. “Not one of the choices on the desk are low-hanging fruit,” stated one of many individuals.
Boosting tax assortment would pose a selected problem. Prabowo goals to extend the tax revenue-to-GDP ratio from 10 per cent to 16 per cent.
“Will probably be an uphill job to beef up fiscal income. Tax assortment shortfalls stem from points with tax compliance and enforcement, which partly stems from poor information availability,” stated Maybank’s Lee.
Another choice is trimming the funds for Nusantara, a brand new capital to be constructed within the tropical jungles of Borneo, in accordance with all three of the individuals acquainted with the discussions. Widodo had billed his pet challenge as a transformative plan to cut back congestion in Jakarta and jump-start financial progress outdoors Java, Indonesia’s most populous island.
However the challenge, which might value as a lot as $32bn, has change into more and more unpopular. Overseas buyers have didn’t materialise, and land acquisition issues have mounted. Nusantara’s management resigned in June simply weeks earlier than a deliberate Independence Day celebration, which might be the primary within the new capital.
“Prabowo seldom talked about Nusantara publicly for the reason that election,” Maybank’s Lee famous. “When you’ve got so many formidable spending plans, it’s good to prioritise.”
Another choice is for Indonesia to tackle extra debt, which Prabowo has up to now known as for the nation to be “extra daring” in doing. Jakarta’s debt-to-GDP degree, at about 39 per cent, is decrease than these of regional friends.
Elevated borrowing might “unleash greater and extra sustainable financial progress” if directed to the fitting sectors, stated UOB economist Enrico Tanuwidjaja.
However the three individuals stated that the administration was additionally cautious of wounding investor confidence or arousing public discontent. Indonesia’s rupiah has weakened virtually 6.5 per cent in opposition to the US greenback this 12 months, the fourth-worst efficiency by a significant Asian foreign money, and analysts have warned that growing borrowing might weaken Indonesia’s credit standing.
One of many individuals acquainted with the administration’s plans stated borrowing could be the final possibility on the desk. “We’d like to have the ability to persuade the general public that we will enhance the tax ratio. Solely then can we justify growing debt,” they stated.
In a information convention late final month, Prabowo’s nephew and adviser Thomas Djiwandono denied reviews that he deliberate to boost the debt-to-GDP ratio to 50 per cent, which economists have stated would breach guidelines that restrict the fiscal deficit to three per cent.
Djiwandono added that the lunch programme could be applied in phases and price $4.3bn within the first 12 months of Prabowo’s five-year time period.
Djiwandono didn’t reply to a request for remark.