If not executed carefully, it could impact the national economy by lowering public purchasing power, creating investment uncertainty, limiting job creation, and reducing labor productivity.

Dr. Akhmad Akbar Susamto, a lecturer at UGM’s Faculty of Economics and Business (FEB UGM), warned the government about the macroeconomic effects of these budget cuts. 

He emphasized that cutting funds, especially in productive sectors like essential infrastructure, education, and health, could hinder long-term economic growth. 

“These sectors have a significant multiplier effect on the economy. If budget cuts are not done selectively, they can negatively affect public investment, job creation, and labor productivity,” Dr. Susamto said on Wednesday, Feb. 5, 2025.

In addition to economic growth, social stability and public welfare may also be impacted. 

Social programs related to protection, subsidies, or assistance for vulnerable groups should not be the main targets for budget cuts. 

“If cuts are too aggressive in these sectors, public purchasing power could decline, reducing domestic consumption and slowing economic recovery,” he explained.

Dr. Susamto noted that if the economic recovery slows, the sustainability of fiscal policy will heavily influence investor perceptions of investing in Indonesia. 

Therefore, budget cuts should be accompanied by clear strategies to maintain economic stability. 

“We must avoid creating uncertainty among businesses. Investors and the private sector need reassurance that the government remains committed to policies that support economic growth,” he stated.

Dr. Susamto agreed that the current budget cuts under the Prabowo-Gibran administration are necessary to maintain economic stability. 

Budget reductions for fiscal efficiency are understandable, especially in light of the unhealthy fiscal situation due to large deficits and increased funding needs for priority programs like MBG and to avoid excessive pressure on government debt.

However, he cautioned that the policy must be implemented carefully to avoid reducing the national economy’s long-term capacity. 

“What’s more important is ensuring that every rupiah of the available budget is used optimally to promote inclusive and sustainable economic growth,” he concluded.

Author: Jelita Agustine  

Editor: Gusti Grehenson  

Post-editor: Lintang

Photo: Media Indonesia

Artikel UGM Economist Assesses the Economic Impact of National Budget Cuts pertama kali tampil pada Universitas Gadjah Mada.

Retailers wishing to continue selling the subsidized LPG must change their status to a distribution point or Pertamina’s official distributor, with a one-month deadline.

UGM economist Dr. Fahmy Radhi criticized Minister of Energy and Mineral Resources Bahlil Lahadalia’s policy, calling it a blunder.

On the contrary, the policy could harm small traders by making it more difficult for consumers to obtain the LPG, which goes against President Prabowo’s commitment to support small people. 

“Retailers have been small traders and small shops earning a living by selling the 3-kg LPG. The ban on retailers selling it will put them out of business,” he said at the UGM campus on Feb. 3, 2025. 

As a result of the ban, grassroots entrepreneurs lose their income. They revert to unemployment and fall back into poverty. 

These small businesses can’t change their status to a distribution point or official Pertamina distributor, as purchasing 3-kg LPG canisters in bulk requires a substantial investment. 

“This policy is also troublesome for consumers, most of whom are poor, as they will have to travel far to buy the subsidized LPG at distribution points,” he explained.

Dr. Radhi reiterated that the ban goes against President Prabowo’s commitment to supporting low-income people, both grassroots entrepreneurs and consumers, the majority of whom are impoverished. 

This policy harms grassroots traders and must be revoked as it burdens the poor. 

“The policy to ban retailers from selling 3-kg LPG must be canceled. Prabowo must reprimand Bahlil for this blunder so that similar policies do not happen again,” he urged.

Author: Agung Nugroho

Post-editor: Lintang

Photo: Harian Jogja

Artikel Government’s LPG Retail Sale Ban Harmful to Small Traders, UGM Economist Says pertama kali tampil pada Universitas Gadjah Mada.

This is because the government is facing difficulties in balancing potential revenue with state spending priorities to support sustainable development. The government’s revenue sources are shrinking while real spending needs continue to grow.

UGM professor of public policy management, Wahyudi Kumorotomo, stated that the budget efficiency target of IDR 306 trillion is substantial and presents a significant challenge for both the central and local governments. 

Although APBN efficiency efforts can be undertaken, their implementation is challenging due to the bureaucratic culture’s ingrained tendency to spend lavishly on routine expenditures. 

“Ministries and agencies, both at the central and regional levels, are accustomed to spending on office supplies, support elements, and technical meetings that have relatively high costs, and all of this is difficult to change,” he said.

Moreover, the number of ministries and agencies at the central level has increased significantly—from 34 to 48, which clearly requires more funding. 

“Many of these new ministries and agencies are still in the process of consolidation, adding personnel, and all of this requires an increase in budget allocation,” he added.

Additionally, the 12% VAT increase, which was ultimately canceled, poses another challenge for the government, as it now must seek alternative revenue sources, which are not easy to find.

If these alternatives are not identified, the 2025 state budget will be strained, and the government will hesitate to pursue options with high economic-political risks. 

“The government could still impose a progressive tax on the super-wealthy or levy additional taxes on natural resource exploration, such as coal, during periods of windfall profits,” he suggested.

However, implementing progressive taxes on the super-wealthy and additional taxes on natural resources requires strong political will and commitment from the government. 

“I believe there are still many opportunities to secure additional funds to improve public welfare, but everything depends on the political will and the government bureaucracy’s initiative to drive welfare-enhancing programs,” he explained.

Professor Kumorotomo also noted that if the government successfully saves and achieves the efficiency target of IDR 316 trillion, its flagship programs could proceed smoothly. 

“I believe priority programs like the Free Nutritious Meals (MBG) program will receive fresh funding,” he remarked.

According to Professor Kumorotomo, if the MBG program is implemented consistently and carefully monitored, it is a highly strategic initiative to improve Indonesia’s human capital, especially if it can achieve its goals of reducing stunting rates, improving the balanced nutritional status of school children, and enhancing academic performance. 

However, ensuring its sustainable implementation will be a challenge in the future.

Author: Jelita Agustine

Editor: Gusti Grehenson

Post-editor: Afifudin Baliya

Photo: Mediaindonesia

Artikel UGM Expert Highlights Bureaucratic Waste as Key Challenge to Budget Efficiency pertama kali tampil pada Universitas Gadjah Mada.

According to reports from various media outlets, the proposal for granting mining business licenses to universities is stated in Article 51A Paragraph (1), which mentions that mining business permits (WIUP) can be granted to universities as a priority.

Dr. Lucas Donny Setijadji, a lecturer in the Department of Geological Engineering, UGM Faculty of Engineering (FT UGM), expressed surprise at the Minerba Bill, which allows universities to manage mines. 

He noted that universities’ role is to produce high-quality human resources, not to manage mines like typical mining companies. 

“I disagree with the government’s and DPR’s intention to grant universities the right to manage mining operations,” said Dr. Setijadji on Thursday (Jan. 30).

According to him, universities should focus on preparing human resources as higher education institutions. Therefore, universities need to be cautious in positioning themselves in this situation and always respond wisely.

However, if the decision to allow universities to manage mines is eventually mandated, Dr. Setijadji stated that the designated universities must take certain actions. 

These include using this opportunity to actively support government agendas, such as the downstream mining program.

Regarding mining downstream activities, Dr. Setijadji, an expert in mineral resource exploration, pointed out that Indonesia currently needs to discover new minerals such as lithium, rare earth metals, and graphite to support downstream acceleration. 

“Unfortunately, these metals have not yet been found in Indonesia,” he explained.

Dr. Setijadji emphasized the need for a legal framework to accommodate researchers interested in various mineral and energy resources based on government-funded research and collaborations with multiple donors. 

“With this legal framework, universities would also have intellectual property rights over discoveries they make in the future,” he asserted.

Author: Lazuardi

Editor: Gusti Grehenson

Post-editor: Afifudin Baliya

Photo: Kompas

Artikel UGM Geology Lecturer Rejects University Management of Mines pertama kali tampil pada Universitas Gadjah Mada.