Indonesia may widen fiscal deficit to fund free school lunch, document shows

By Reuters February 25, 2024 | 08:52 pm PT

Students pose for a photo at a school in Indonesia. Photo by Pexels

Indonesia may have to widen its budget deficit to fund a multi-billion-dollar free school lunch programme promised by likely new president Prabowo Subianto, showed a briefing document seen by Reuters on Sunday.

Defence Minister Prabowo and running mate Gibran Rakabuming Raka, the eldest son of outgoing president Joko Widodo, declared victory in this month's presidential election after a quick ballot count on Feb. 14 showed they had won nearly 60% of votes, ahead of the official results announcement due by March 20.

President Widodo's cabinet has since started to calculate the cost of the lunch programme, said a person familiar with the matter, declining to be identified as they were not authorised to speak with media.

Analysts said the programme could undermine Indonesia's track record of fiscal discipline.

The document, prepared by the coordinating ministry for economic affairs, showed the programme could widen the budget deficit by as much as 0.33% of gross domestic product (GDP) in 2025 if introduced across the world's third-biggest democracy.

The ministry arrived at the figure by assuming each child from one year old through to the end of elementary school - 58 million children - receives one meal a day worth up to 15,000 rupiah ($0.96) or less than $1 for five days a week, for a total cost of 193.2 trillion rupiah ($12.39 billion).

The cost would drop to about a third of that total if the programme is only offered to children of low-income households.

The calculations assumed a 2025 budget deficit of less than 2.5% of GDP, and 2025 economic growth of 5.3% to 5.6%, the document showed.

For comparison, the fiscal deficit for 2024 has been set at 2.29% of GDP, while the economic growth target is 5.2%.

The programme will be discussed with President Widodo at a cabinet meeting on Monday, CNBC Indonesia cited Airlangga Hartarto, coordinating minister for economic affairs and a member of Prabowo's election campaign team, as saying on Friday.

The ministry and the presidential office did not respond to Reuters requests for comment.

Prabowo's campaign team has said the programme will initially require up to 120 trillion rupiah, before reaching 450 trillion rupiah when nationwide coverage is achieved in 2029.