Finance Minister Purbaya Yudhi Sadewa\u2019s statement that Indonesia\u2019s\nState Budget (APBN) is one of the \u2018most sophisticated\u2019 in Asia is\ncertainly worth examining. This claim is not fiction; in recent years,\nthe APBN has proven to be a capable shock absorber against a series of\nhits, ranging from the Covid-19 pandemic and global inflation to\ngeopolitical tensions. BPS data (202 and 2026) confirms this, with\nIndonesia\u2019s economic growth in Q1-2026 surging by 5.61% year-on-year,\nwhile the Ministry of Finance successfully kept the fiscal deficit\nwithin safe corridors.<\/p>\n
However, a crucial question often overlooked by policymakers is: Does\na \u2018sophisticated\u2019 APBN automatically reflect a \u2018strong\u2019 fiscal posture?\nThe answer is: Not necessarily. The strength of fiscal instruments\ncannot be measured solely by their short-term ability to dampen crises\n(stabilisers). The primary indicator is the effectiveness of budget\nutilisation in stimulating long-term economic transformation\n(accelerators). It is here that structural fiscal flaws begin to\nemerge.<\/p>\n
First, the low tax ratio, which remained stuck around 10%-11% of GDP\nthrough 2025, presents a significant challenge. This figure is starkly\nlow compared to the OECD average of 34%, and even lags behind Thailand\nand Vietnam. Economist Faisal Basri (2024) warned that Indonesia\u2019s main\nfiscal issue is not the scale of spending, but the weak capacity of\nstate revenue. With a narrow tax base, the government\u2019s manoeuvring\nspace is automatically restricted, potentially trapping the nation in\ndebt dependency to fund development.<\/p>\n
Second, there is an anomaly in the expenditure structure, which is\ndominated by rigid items. Personnel expenses, misdirected energy\nsubsidies, debt interest payments, and Regional Transfer Funds (TKD)\nconsume the largest portions of the APBN. Consequently, space for\nproductive spending\u2014such as research, innovation, education quality,\nhealthcare, and industrialisation\u2014is marginalised. As Joseph Stiglitz\n(2019) noted, the quality of government spending is far more crucial\nthan its quantity. Nations that successfully leap into becoming economic\ngiants are those that treat the budget as a tool for transformation, not\nmerely a stabilisation bumper.<\/p>\n
Furthermore, we cannot ignore the growing debt burden. Although the\ndebt ratio remains below the safe limit of 40% of GDP, the interest\npayment burden is becoming concerning. In the 2026 APBN structure, the\nallocation for debt interest payments is estimated to exceed Rp500\ntrillion. This serves as a loud alarm, as much of our fiscal space is\nbeing drained by debt rather than funding the future. This is\nexacerbated by an economic growth engine heavily reliant on household\nconsumption (contributing over 53% to GDP), which does not generate\nsignificant employment. The World Bank (2025) warned that without\nstrength in the manufacturing and value-added export sectors, it will be\nimpossible for Indonesia to escape the middle-income trap.<\/p>\n
To ensure the APBN becomes a growth engine rather than just a\n\u2018firefighter\u2019, two key strategies are recommended. First, increasing\nrevenue: Tax reform must move beyond administrative comfort. The\ngovernment must courageously expand the tax base fairly, including\nexploring progressive taxes for the ultra-wealthy and increasing non-tax\nstate revenue (PNBP) from the utilisation of State-Owned Assets (BMN).\nAdditionally, the digital economy, projected by Google-Temasek-Bain to\nreach US$144 billion, must be optimised.<\/p>\n
Second, reducing expenditure: The culture of bureaucratic\ncorporatisation\u2014wasting budgets on ceremonial spending, low-output\nofficial travel, and unproductive \u2018monumental\u2019 projects\u2014must stop.\nPolitical appointments that erode the APBN for the sake of political\npatronage should be reduced. Through the example of its leaders, the\nstate must stop displaying luxury amidst the pressure on people\u2019s\npurchasing power by adopting a simple and dignified lifestyle.\nEfficiency is not about cutting public budgets, but about ensuring\noptimal value for money.<\/p>\n
In conclusion, while the APBN is becoming more modern and digital, it\nhas not yet fully levelled up. Our fiscal instruments are very clever at\nextinguishing the flames of crisis, but they lack the power to build a\nsolid new foundation. Facing the crucial years leading to \u2018Indonesia\nEmas 2045\u2019, fiscal targets must no longer merely aim to survive at a\npsychological 5% level. The APBN must be transformed into a strategic\nweapon that drives productivity and accelerates industrialisation.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/a-sophisticated-state-budget-is-not-enough-1780896423", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }