automotive

The Reallocation Of The Budget Amounting To Rp 306 Trillion Has The Potential To Stimulate The Economy, Provided That The Allocation Is Appropriately Directed

The government plans to implement a budget efficiency measure amounting to Rp 306.69 trillion in 2025. This budgetary savings will be derived from the budgets of ministries and agencies (K/L) as well as transfers to regions (TKD). 

Yusuf Rendy Manilet, an economist at the Center of Reform on Economics (CORE) Indonesia, believes that the reallocation of the budget could have a positive impact on the economy, although this is contingent upon the programs funded by the budget. 

However, if there is no reallocation or if the budget is simply cut, it could hinder economic growth. For instance, in 2016, the government implemented budget cuts in the third quarter without any reallocation, which resulted in a slowdown in economic growth from 5.03% in the third quarter of 2016 to 4.94% in the fourth quarter. 

"When discussing budget reallocation, the outcome will depend on the programs that the government intends to implement. However, if reallocation occurs, the impact will not be as significant as if the government merely cuts the budget," Yusuf stated to Kontan on Thursday, January 23. 

Yusuf further explained that the reallocation of the budget could positively influence the economy if directed towards social assistance spending and capital expenditures in infrastructure development. Such expenditures have a greater potential to generate a multiplier effect on the economy. 

Additionally, if the funds are allocated to the free nutritious food program (MBG), it could also yield positive economic effects, particularly if the program engages a larger number of micro, small, and medium enterprises (MSMEs). Furthermore, Yusuf noted that this budget efficiency policy appears to align with the government's decision not to raise the VAT rate to 12% this year for general goods, applying it only to luxury items, which means there will be no additional revenue entering the state treasury. 

Tag: Center Of Reform On Economics TKD