Why Is Budget Deficit Widening Under Prabowo? Experts Voice Concern

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TEMPO.CO, Jakarta - A senior economist at Bright Institute, Awalil Rizky, assessed that the projected 2025 State Budget deficit of Rp662 trillion, or 2.78 percent of Gross Domestic Product (GDP), as a concerning sign, particularly since President Prabowo's administration is only in its first year. This figure is higher than the government's previous target of Rp616 trillion (2.53 percent of GDP).

"The first year of a new administration should prioritize policy programs that haven't been fully implemented. It should be more of a preparation for the following years," Awalil told Tempo on Monday, July 7, 2025. He believes the fiscal condition in this administration's inaugural year is already quite burdensome.

Furthermore, Awalil noted that the budget deficit could approach 3 percent if the 2025 GDP turns out lower than expected. The government itself forecasts economic growth in 2025 to be around 4.7 to 5 percent of GDP, a decrease from the initial target of 5.2 percent.

Separately, Achmad Nur Hidayat, an economist from the University of Pembangunan Nasional (UPN) Veteran Jakarta, attributes the widening State Budget deficit to government spending growing faster than state revenue. He also pointed to costly government priority programs, such as the Free Nutritious Meals (MBG) initiative. "The expansion of this deficit is triggered by political priorities, not fiscal rationality," Achmad said in a written statement on Monday, July 7, 2025.

According to Achmad, on paper, the State Budget deficit remains "safe" as it is below 3 percent of GDP. However, the actual implementation is far from ideal. For instance, Achmad cited that the MBG program's budget realization has only reached Rp5 trillion out of an allocation of Rp71 trillion. This suggests that while the government is adept at increasing debt, it struggles to execute priority spending quickly and accurately.

The initial projection of a widened State Budget deficit was conveyed by Minister of Finance, Sri Mulyani Indrawati, during a working meeting with the Budget Agency of the House of Representatives at the Parliament Complex, Senayan, on Tuesday, July 1, 2025. Sri Mulyani explained that this deficit is partly due to a decrease in state revenue.

"In the first quarter of 2025, we experienced pressure from the state revenue side, due to several measures such as Value Added Tax that was not collected, and also dividends from State-Owned Enterprises (SOEs) that were not paid because they are now held by Danantara," she stated. The House of Representatives has since approved the use of the Surplus Budget Balance (SAL) amounting to Rp85.6 trillion to help finance the State Budget deficit.

Editor's Choice: Prabowo's Programs Add Strain to 2025 State Budget, Says Sri Mulyani

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