Government Deemed to Fail in Understanding the Mathematics of Political Economy

Fiscal policy of the central government is deemed inappropriate, especially considering the current economic conditions. The central government is accused of neglecting the basic logic of economic mathematics. Social observer Mira H Tohir, in Bandung on Friday (27/3), stated that the potential collapse of a nation is often not caused by external factors, but by leadership incompetence in managing budget balance. She emphasised that a country does not go bankrupt overnight, but through a process of accumulating widening deficits. Populist political decisions without adequate analytical capacity can become structural problems that systematically impoverish society. “Every country is actually subject to simple mathematics. If the government continues to run budget deficits, debt will certainly increase. The problem is, the current government seems not to understand that when debt balloons, fiscal space narrows and the state budget will only become a machine for paying interest, not a tool for development,” she continued. Using mathematical simulations, Mira dissected Indonesia’s fiscal risks. With the current debt ratio at 41% of GDP and economic growth at 5%, Indonesia is still in a zone of fiscal discipline. However, this situation is threatened to reverse if permanent populist programmes continue to be added without new revenue sources. She gave a concrete example regarding the planned free nutritious meal programme (MBG), estimated to require permanent expenditure of 1.5% of GDP or around Rp357 trillion per year. “In mathematical calculations, if this additional spending is forced without an increase in state revenue, our debt ratio could jump to 48% in five years and exceed the safe limit of 60% in 16 years. Even if additional spending reaches 2.5% of GDP, the debt ratio could hit 100% in two decades,” she explained. Narrow loyalists Mira highlighted the phenomenon of echo chamber leadership in the circles of power. This occurs when leaders only receive information that reinforces their own beliefs and are surrounded by political loyalists instead of experts who dare to criticise. “Leadership incompetence is not just a personal issue, but a combination of failing to read long-term risks. Instead of being surrounded by people with intellectual capacity, leaders prefer narrow loyalty circles. As a result, policy mistakes are never corrected and are even amplified,” she added. She referred to the economic destruction in Venezuela under Nicolas Maduro and Zimbabwe in the Robert Mugabe era as real examples of how bad economic policies destroy resource-rich countries. In Venezuela, hyperinflation reached 1,000,000% in 2018, while Zimbabwe was forced to abandon its national currency due to managerial failure. In the end, she said, it is the people who will pay the ‘hidden tax’ from these policy mistakes through high inflation, expensive credit interest, and rising taxes. “Countries rarely collapse due to lack of resources. They collapse because economic mathematics is ignored by incompetent leaders. Do not let Indonesia fall into the same trap just for momentary public applause,” she stressed.