Indonesia to Propose Wider Budget Deficit to Fund Free Lunches

(Bloomberg) -- Indonesia plans to propose a wider budget deficit for next year to fund new policies by the incoming president, which may include Prabowo Subianto’s free lunch program.

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The fiscal gap may rise to 2.45%-2.8% of gross domestic product in 2025, Finance Minister Sri Mulyani Indrawati told reporters after a cabinet meeting on Monday. This year’s target was 2.29%. Meanwhile, economic growth could reach 5.3%-5.6% next year, from 5.2% in 2024.

The deficit estimate has accounted for priority projects like the free lunch and milk for students across the nation, said Indrawati. That program is a key campaign promise from Prabowo, who’s poised to succeed President Joko Widodo after winning nearly 60% of votes in unofficial quick counts at the Feb. 14 election. The official results should be announced by March 20.

Prabowo’s free lunch plan has raised concerns over Indonesia’s fiscal health, with Fitch Ratings warning that the program could cost around 2% of GDP and a material increase in the debt burden could lead to a credit rating downgrade.

The government will ensure a sustainable budget that can support the new policies, Indrawati said on Monday. The free lunch program will be implemented gradually, starting with a pilot project in 2025, said Coordinating Minister for Economic Affairs Airlangga Hartarto after the cabinet meeting.

The government will propose the budget deficit and growth forecasts for parliament discussion as a basis for drafting the 2025 state budget.

--With assistance from Claire Jiao.

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