Decile-Based Subsidies: Economist Highlights Efforts to Safeguard the State Budget

The government has introduced decile-based targeting for various types of subsidies, including Pertalite fuel, the Smart Indonesia Card (KIP), and affirmative school admissions, as an effort to ensure assistance is better targeted. Economists assess that the policy is being implemented to anticipate a swelling of the State Budget (APBN) amid global economic uncertainty.

“I see it as an effort to position the targets of subsidies. Basically, subsidies are given to the most underprivileged communities. So people who are already considered capable should no longer need subsidies,” said Executive Director of the Center of Reform on Economics (CORE) Indonesia, Mohammad Faisal, to Republika on Thursday (13/8/2026).

However, the criteria between underprivileged and capable communities can shift or be adjustable. This is a separate note. Nevertheless, Faisal places greater emphasis on the policy by looking at the fiscal condition.

“One of the considerations is the limitation on the fiscal side. So if the fiscal space is limited, subsidies automatically have to be filtered more. Which ones are the highest priority? So the priority for receiving subsidies becomes stricter in its criteria when the budget is limited. So of course that is what must be done. Because on the other hand, we do have to maintain the health of the APBN. We do not want the APBN to balloon,” he explained.

He said that the current subsidy budget has indeed automatically increased because energy costs have been pushed up amid global geopolitical and geoeconomic dynamics. Therefore, amid these conditions, the allocated subsidies should be better targeted.

“One of the steps is to identify the beneficiaries or the people who receive subsidies based on deciles. But with categorisation based on deciles, we are not only looking at the levels, but also the spending limits for each decile,” he said.

By tightening the subsidy policy based on certain deciles, it is hoped that there will be no inclusion errors or exclusion errors. In other words, it is hoped that subsidies can truly be better targeted.

“So the essence of this is to sharpen the recipients of subsidies so that they are truly on target and also to avoid budget overruns,” he asserted.