Evaluation of Government Spending in the Defence Sector in 2025
The Ministry of Defence has proposed increasing the defence budget ceiling in the 2027 state budget to Rp334 trillion, up from the indicative ceiling of Rp139 trillion. An interesting point to consider is whether, if approved by the government and the House of Representatives, this entire ceiling would be placed under the Ministry of Defence’s budget or partially allocated to the State General Treasury. Government spending in the defence sector has seen a sharp increase since 2020, with the exception of a decline in 2021 due to the Covid-19 pandemic. This increase is visible in both Rupiah and foreign currencies, with a significant rise in defence sector debt over the decade.
Regarding government spending in the defence sector, the Audit Board of Indonesia recently published its 2025 Report on the Audit of Central Government Financial Statements. The report reinforces the fact that defence spending remains a priority. Several points from the report are noteworthy. First, in terms of spending by function, defence spending is only surpassed by general public services and economic functions, ranking above education. When translated into ministry and state general treasury budgets, the funds used are far larger than those of other ministries. Defence spending in recent years has been a combination of the Ministry of Defence budget and the State General Treasury, meaning the Ministry’s ceiling cannot be used as the sole benchmark. The Audit Board’s reports over recent years consistently place defence spending among the top three, reflecting special government attention, a development inseparable from the figure of Prabowo Subianto, both as Minister of Defence and as President. However, questions remain about the effectiveness of this spending, particularly for activities funded by pure Rupiah, as planning tends to be top-down rather than combining top-down and bottom-up approaches.
Second, the realisation of defence spending in the 2025 state budget reached Rp348.58 trillion, or 23.52% of total ministry and institution spending. This compares to an initial budget ceiling of only Rp166.05 trillion and a previous year’s outlook of Rp247.5 trillion, marking a 209.91% increase over the original budget. This continues an empirical trend of rising realisations, with 2023 seeing Rp171.48 trillion spent against a ceiling of Rp134.31 trillion, and 2024 realisations reaching Rp190.27 trillion against a Rp139.10 trillion ceiling. The continuous increase is linked to injections of funds from the State General Treasury, an allocation explicitly stated for the 2026 budget.
Third, the 2025 report provides a breakdown of Ministry of Defence spending by type, a detail absent in previous years. Capital expenditure absorbed Rp213.54 trillion, goods expenditure Rp77.02 trillion, and personnel expenditure Rp58.37 trillion. This shows capital expenditure at 61%, goods at 22%, and personnel at 16%, indicating a shift from the decades-long dominance of personnel spending. The dominant role of capital expenditure is closely linked to the military modernisation programme ongoing since 2020. A question arises whether this composition can be maintained given the target of establishing 750 Territorial Development Battalions by 2029, which alone would require 892,500 personnel based on the table of organisation and equipment.
Fourth, the position of defence capital expenditure within overall government capital spending is significant. The report shows total realised government capital expenditure was Rp427.05 trillion, with the defence function accounting for Rp213.54 trillion. This means 50% of all government capital expenditure last year was executed by the Ministry of Defence, used for items such as weapons systems and down payments for defence equipment acquisition contracts.