Indonesia’s austerity push sparks concern over public services, economic growth

Jumilah, a 49-year-old homemaker in Jakarta, felt relief when she finally managed to buy a 3-kilogram (6.6-pound) cylinder of liquefied petroleum gas (LPG) after weeks of shortages. 

The bottle of cooking gas, which she purchased with a government subsidy at an official gas agent, cost her only 17,000 rupiah (about U.S. $1.10), a price lower than those charged by neighborhood retailers. But the hassle of obtaining it underscored the broader economic challenges facing ordinary Indonesians.

“Usually, I just order from the shop across the street,” Jumilah, who goes by one name, told BenarNews. “Now, I have to go all the way to the distributor. What happens if I run out of gas while cooking?”

Jumilah’s struggle is emblematic of a broader challenge facing Indonesia as the government of President Prabowo Subianto embarks on an ambitious plan to slash 306.7 trillion rupiah ($18.7 billion) from this year’s national budget. 

In recent weeks, long lines for subsidized LPG gas have become common across Indonesia after the government tightened distribution controls to prevent misuse.

The desperation reached a tragic point in a district on the outskirts of Jakarta last week, when a 62-year-old woman reportedly collapsed and died after waiting in line for a cylinder of the cooking gas. 

The Feb. 3 incident sparked outrage, with many Indonesians blaming the government’s efficiency measures for putting vulnerable people at risk.

The next day, the government announced it was lifting the earlier restrictions on small retailers selling subsidized LPG following widespread shortages and rising prices. 

The policy reversal allows independent sellers to resume sales while they transition into official sub-distributors under new government regulations, said Sufmi Dasco, a deputy parliamentary speaker.

While officials insist the budget cuts will ensure more efficient spending, critics argue they risk undermining key public services and slowing Southeast Asia’s largest economy.

Indonesia, a nation of nearly 280 million people, has enjoyed steady economic growth, with its GDP expanding by 5% annually in recent years. Its state budget has traditionally included large subsidies for fuel and social services, ensuring affordability for millions.

However, challenges remain, including income inequality, uneven access to healthcare and education

Prabowo, a former army general who took office in October 2024, has pledged to address these issues through a series of sweeping reforms. 

His administration’s centerpiece initiatives include providing free nutritious meals to 82.9 million school children and offering free health checkups at thousands of clinics nationwide. 

But with a price tag of over 171 trillion rupiah (U.S. $10.5 billion) for the meal program this year alone, the government has turned to austerity measures to free up funds.

The budget cuts target a wide range of sectors, from infrastructure to education. The Nusantara Capital City Authority, tasked with building Indonesia’s new capital, faces a cut of 4.81 trillion rupiah ($294.4 million), or 75 %, of its operational budget.

The Public Works Ministry, responsible for roads, dams, and irrigation, will see its budget slashed by 73.3%, or $5.2 billion. Even the Health Ministry, despite its critical role in the free health check-up program, is not spared, with a 19 trillion rupiah ($1.2 billion) cut.

While 17 ministries and agencies, including the Defense Ministry and the House of Representatives, remain untouched, the cuts have drawn criticism for their potential impact on public services. 

For instance, the Religious Affairs Ministry has said it expects reduced funding for operational grants and teacher education for Islamic schools. 

The Manpower Ministry has delayed competency-based training programs, and the Public Works Ministry warned that key infrastructure projects could be disrupted.

The government has defended the budget shift, saying it eliminates wasteful expenses and travel while protecting essential services.

“The president has made it clear that public services, subsidies, and civil servant salaries, as well as social assistance, will not be affected by budget efficiency measures,” presidential spokesman Hasan Nasbi said on Friday.

But businesses warned that the broader economic impact of the cuts could ripple through the economy, affecting jobs and livelihoods. 

The hospitality industry, for example, is bracing for a downturn as government events, which account for 40-60% of hotel revenue in some regions, according to the industry association, are scaled back. 

“Hotels are part of a larger economic ecosystem that includes small and medium enterprises,” Maulana Yusran, secretary-general of the Indonesian Hotel and Restaurant Association, told BenarNews. “These government activities serve as a vital stimulus for the broader economy.”

Doni Koesoema, an education expert at Multimedia Nusantara University, warned that reductions in scholarship and teacher training programs could have long-lasting consequences.

“Slashing these could degrade the quality of education,” he told BenarNews. “Reducing overseas trips and meetings is fine – but not at the cost of students’ futures.”

Djoko Setijowarno, a transportation analyst, said the budget cuts should not come at the expense of maintaining infrastructure. 

“If roads deteriorate, transporting goods will become more difficult, disrupting supply chains and hindering economic flow,” Djoko told BenarNews.

In addition, slashing government spending too deeply could lead to layoffs and a decline in purchasing power, according to Wijayanto Samirin, an economist at Paramadina University. 

“Reducing government travel expenses alone will significantly affect tourism, hospitality, and transportation sectors,” he said. 

Bhima Yudhistira, executive director of the Center of Economic and Law Studies (CELIOS), pointed out that government spending had contributed about 7% to Indonesia’s GDP in 2024, driven in part by election-related activities. 

With the planned cuts, this figure could drop to 5% in 2025, potentially undermining efforts to boost export competitiveness, he said.

“Drastic budget cuts will have consequences beyond the free meals program,” he told BenarNews. “The government must carefully evaluate these budget reductions before implementing them.”

On Monday, Prabowo reiterated his firm stance on budget efficiency, criticizing excessive spending on overseas trips and seminars by government officials.

“Why are we learning about poverty alleviation by going to Australia?” Prabowo said. “Enough with the seminars. Enough with all these studies.”

Arie Firdaus in Jakarta contributed to this report.