Prabowo stands firm on free meals program amid fiscal pressures

President Prabowo Subianto has reaffirmed his commitment to the Makan Bergizi Gratis (MBG) program, framing it as a key driver of economic growth despite concerns about Indonesia’s fiscal outlook amid rising global oil prices.

Investing in People and Local Economies

Prabowo described the MBG program as a stimulus for growth at the grassroots level, designed to boost purchasing power and support broad-based economic development. The initiative is expected to benefit 82.9 million people, including schoolchildren, toddlers, and pregnant or nursing mothers.

The program has a budget allocation of Rp335 trillion (approximately US$19.7 billion), representing around 11 percent of total government spending. Implementation will rely heavily on Koperasi Desa Merah Putih to ensure public spending circulates within rural economies and strengthens local supply chains.

Rising Fiscal Pressures

Indonesia faces mounting fiscal challenges due to global energy price volatility and the Indonesian Crude Price (ICP). Coordinating Minister for Economic Affairs Airlangga Hartarto warned that the country’s legally mandated deficit-to-GDP ceiling of 3 percent could be threatened.

Government simulations indicate that if oil prices rise to between US$115 and US$120 per barrel, the deficit could widen to approximately 4.06 percent. “Under these scenarios, maintaining a 3 percent deficit is difficult unless we are willing to cut spending and compromise growth,” Airlangga said.

Policy Flexibility, But No Emergency Measures

While the government is assessing policy options to manage potential fiscal strain, officials have stated that issuing a Peraturan Pemerintah Pengganti Undang-Undang (Perppu), or emergency regulation, is not currently being considered. Airlangga indicated such a step would only be taken as a last resort if global pressures persist or escalate.

Balancing Discipline and Growth

Prabowo emphasized that fiscal discipline remains a priority, describing the 3 percent deficit ceiling as an important safeguard that would only be exceeded under exceptional circumstances.

Indonesia’s strategy reflects a balance between sustaining domestic growth and maintaining fiscal credibility. The trajectory of global oil prices will be a key factor in the government’s ability to uphold both priorities in the coming years.