Budget efficiency has been a hot topic lately, especially in relation to government policy. This efficiency push is outlined in Presidential Instruction (Inpres) No. 1 of 2025 on Spending Efficiency and the Implementation of the 2025 State and Regional Budgets, issued on January 22, 2025.
Hasan Nasbi, Head of the Presidential Communication Office (PCO), stated that the efficiency efforts would not affect employees’ basic needs, public services, or social assistance. Instead, budget cuts will target ceremonial expenses, overseas seminars, and year-end events, items that are widely viewed as budget drains. Hasan emphasized that funds for tuition, university operational costs, scholarships, and the KIP College program will remain untouched.
How Budget Efficiency Will Be Implemented
According to a recent report by Kompas.id, President Prabowo is aiming for up to $44 billion USD, or around IDR 750 trillion, in budget efficiency during his first year in office. The goal is to fund the Free Nutritious Meals (MBG) program and inject capital into BPI Danantara. This efficiency effort will roll out in three phases.
Phase One involves savings of IDR 300 trillion from the General Treasurer’s Budget (BA BUN)—a funding allocation directly managed by the Ministry of Finance and not under any specific ministry or agency.
Phase Two comes from across-the-board budget cuts to all ministries and institutions (K/L), finalized as of February 14, 2025. As per Presidential Instruction No. 1/2025, the budget efficiency go down to level-9 budget items (detailed expenditure units). Initially targeted at IDR 306.7 trillion, the figure later increased to IDR 308 trillion. Out of this, IDR 58 trillion will be redistributed to 17 ministries or agencies, though it remains unclear which ones will receive the funds. This leaves the government with IDR 250 trillion in net efficiency gains from the second phase.
Phase Three targets additional revenue from dividends of state-owned enterprises (SOEs). This phase aims to contribute another IDR 300 trillion in 2025, with IDR 100 trillion planned to be reinvested in SOEs through state capital injections (PMN).
Budget Efficiency Purpose, and How Are People React
Wihadi Wiyanto, Deputy Chairman of the House Budget Committee from the Gerindra Party, clarified that the savings won’t solely fund MBG and Danantara. The IDR 58 trillion returned to the 17 ministries will support school improvement programs, food security, and other initiatives.
However, Wijayanto, an economist from Paramadina University, expressed concern over the abruptness and scale of the savings. He questioned the transparency behind the figures and warned that such large-scale, sudden cost-cutting might negatively affect Indonesia’s economy.
Evaluating the Efficiency Policy
In principle, budget efficiency—like that encouraged under Presidential Instruction No. 1/2025—has good intentions: to manage resources more wisely and avoid waste. Ideally, spending becomes more productive and better aligned with organizational goals.
On paper, cutting costs on non-essential items like ceremonies, overseas seminars, and year-end events seems smart. But in practice, challenges often arise. Even if education budgets remain untouched, other areas such as research and institutional development may suffer. Yet these areas are key drivers of innovation and service quality. Moreover, constant changes in efficiency targets can disrupt long-term planning and create uncertainty.
Important Considerations Before Cutting Costs
Before implementing cost-saving measures, careful analysis is essential. Innovation must not be sacrificed due to reduced operational funding. Organizations are interconnected systems—cutting one area can have ripple effects across others.
Efficiency should also go beyond budget cuts. It’s about finding new revenue streams and balancing cost-saving with strategic investment. Every budget efficiency must have a clear strategic purpose. Otherwise, efficiency becomes just another word for arbitrary budget slashing.
Leaders must distinguish between essential spending and unnecessary luxuries. By doing so, limited resources can be allocated more effectively and sustainably.
Ideally, budget efficiency becomes a turning point to transform bureaucratic culture, often seen as bloated and ineffective. Cutting symbolic expenditures like ceremonies and overseas trips reflects a shift toward more meaningful, impact-driven spending.
For businesses, budget efficiency is a good time to re-evaluate whether recurring activities actually add value. If not, it may be time to let them go.
