admin
KN-JAKARTA, Yusuf Rendy Manilet, an economist at the Center of Reform on Economics (CORE), stated that budget efficiency policies need to be ensured to prevent economic activity and revenue stagnation. The government currently still has sufficient room to reduce spending, but this is increasingly limited and is largely determined by the quality of its efficiency.
In general, if cuts are focused on administrative spending or low-impact ministry/institution (K/L) programs, the impact of budget efficiency on economic activity is relatively minimal.
However, when efficiency begins to affect spending with a high multiplier effect, including some strategic programs and spending that boosts the real sector, the impact can spread economic growth.
According to him, budget efficiency policies are capable of withstanding short-term pressures, including keeping the State Budget (APBN) deficit under control. However, the challenges in the subsequent period are greater because there is a risk that economic growth will also slow when spending is reduced. Ultimately, tax revenue growth could also be restrained.
Yusuf stated that spending efficiency is not sufficient to maintain a controlled deficit until the end of the year, as there is a trade-off between spending savings and the sustainability of the revenue base. “Maintaining healthy deficit requires combination of policies, not just disciplined spending, but also efforts to maintain economic activity to prevent revenue erosion,” he said.
Meanwhile, the Institute for Development of Economics and Finance (INDEF) stated that the budget efficiency plan needs to be supported by a combination of other policies to effectively control the State Budget (APBN) deficit.
INDEF’s Head of the Macroeconomics and Finance Center, M. Rizal Taufikurahman, when contacted by ANTARA in Jakarta has explained that current fiscal pressures are structural, stemming from energy subsidies, rising debt interest costs, and priority spending needs. Therefore, budget efficiency policies cannot stand alone to keep the deficit under control.
In general, he assessed that the government’s budget efficiency room is still adequate, but limited and must be implemented selectively. Realistic efficiency room only comes from non-priority spending, given the increasingly tight spending structure, particularly for energy subsidies, personnel expenses, and debt interest.
The implementation of budget efficiency must also ensure that it meets spending quality requirements, so that its role is not merely about savings. Key indicators to consider to assess the effectiveness of budget cuts include increased program impact on the budget, improvements in the Incremental Capital Output Ratio (ICOR), a shift to productive spending, and stable macroeconomic indicators such as growth above 5 percent and controlled inflation.
To tackle the pressure, Rizal highlighted the scope for policy optimization through increased revenue, reprioritization of outcome-based spending, and credible financing management. These efforts are deemed necessary to be implemented simultaneously with the implementation of budget efficiency.
Ekonom Center of Reform on Economics (CORE), Yusuf Rendy Manilet. (Source: screenshot of Yusuf Rendy Manilet interview/ Alfida Rizky)
