Efficiency Must Be on Target; Wrong Cuts Could Suppress Growth
The head of the Macroeconomic and Finance Centre at the Institute for Development of Economics and Finance (Indef), M. Rizal Taufikurahman, believes that the government’s budget efficiency measures are indeed an urgent necessity. However, their implementation must be precise to avoid negative impacts on the economy.
According to him, the urgency of budget efficiency in the current situation is high, but it should be understood as an improvement in spending quality, not merely a reduction in nominal amounts. Amid global pressures, limited fiscal space, and the need to keep the deficit under control, the government must ensure that every rupiah spent has an optimal multiplier effect.
Efficiency is relevant for reducing structural inefficiencies such as administrative and ceremonial spending, while redirecting the budget to productive sectors like infrastructure, food, health, and support for micro, small, and medium enterprises (MSMEs).
“However, risks to growth will emerge if efficiency is carried out too aggressively and without selectivity. Therefore, it must be on target,” Rizal told Media Indonesia on Sunday (29/3).
He views that government spending cuts amid weak domestic demand and not-yet-strong credit transmission could hold back consumption, investment, and job creation.
In the macroeconomic framework, government spending is one of the main pillars of aggregate demand, so spending contraction could lower growth in the short term.
“Therefore, the policy line must be clear: cut low-impact or minimally impactful spending, but maintain or even strengthen high-impact spending,” Rizal explained.
In addition to efficiency efforts, the government is drafting regulations for work from home or working from home one day a week to save on fuel oil (BBM) consumption. Rizal assesses that the impact of this policy on national economic productivity is heterogeneous.
In knowledge- and digital-based sectors, WFH can increase efficiency through reduced commuting time, work flexibility, and lower operational costs. However, in the long term, productivity could be pressured if collaboration, innovation, and work control decline.
“This is especially if implemented fully without a hybrid mechanism,” he said.
From a sectoral perspective, WFH tends to benefit modern service sectors such as finance, information technology, consultancy, and professional services that can be digitised. Conversely, sectors dependent on physical mobility such as transportation, offline retail, food and beverage in office areas, and hospitality will be negatively impacted due to reduced activity and daily consumption.
“This means that the WFH policy should be applied selectively and sector-based, so that efficiency benefits do not sacrifice real economic dynamics,” Rizal concluded.
In agreement, the General Chairman of the Indonesian Employers Association (Apindo), Shinta Widjaja Kamdani, opines that implementing WFH one day per week cannot be applied simultaneously across all sectors. According to her, several real sectors such as manufacturing, logistics, trade, and field-based operational services still heavily rely on the physical presence of workers to ensure optimal production and distribution processes.
The government itself plans to implement the one-day-a-week WFH policy after Eid as part of budget efficiency measures amid the impact of the Middle East conflict. This policy is not only aimed at civil servants (ASN) but is also expected to be followed by the private sector.
“If this WFH discourse is implemented, it certainly cannot be implemented uniformly across all sectors,” Shinta told Media Indonesia on Monday (23/3).
She explained that many real sectors still require the physical presence of workers and operational mobility to ensure production and distribution activities run well. Nevertheless, there are also sectors deemed more flexible in implementing WFH, such as information technology to creative professions.
Therefore, according to Shinta, in addition to considering the sector side, WFH implementation also needs to consider the type of activity and work whether it can be done remotely.
Furthermore, the business world views that work pattern arrangements should be left to the internal policies of each company so they can be adjusted to operational needs and sector characteristics. Apindo also considers it important to have more in-depth studies and room for discussion with business actors before the policy is implemented.
“This is so as not to cause disruptions to economic activities and operations of affected business sectors,” said Shinta. (H-2)
In addition to the WFH policy, observers emphasise the importance of government spending efficiency, particularly on major programmes.
The President explained the need for efficiency by looking at Indonesia’s ICOR score, which tends to be higher compared to neighbouring countries.
He affirmed that the government will continue to prioritise more productive and targeted spending.
He emphasised that the public needs concrete examples from leaders regarding efforts to efficiency the state budget.