Full Breakdown
Indonesia's Free Meals Programme Under Scrutiny Amid Rising Oil Prices
3/20/2026, 7:30:51 PM
Economic Pressures and Government Spending
As global oil prices surge, Indonesian economists are urging the government to reconsider the expansive free nutritious meals (MBG) programme initiated by President Prabowo Subianto. The programme, which aims to provide meals for nearly 83 million beneficiaries, including schoolchildren and pregnant women, is set to consume 335 trillion rupiah (approximately S$25.3 billion) in 2026. This expenditure represents 1.3% of Indonesia's gross domestic product (GDP) and accounts for about 11% of the national budget. The rising costs of energy, exacerbated by geopolitical tensions in the Middle East, have prompted concerns regarding the sustainability of such spending.
Budget Constraints and Policy Recommendations
The Indonesian government has allocated 25.1 trillion rupiah for fuel subsidies based on an anticipated global oil price of US$70 per barrel. However, current prices have exceeded US$100 due to disruptions in Middle Eastern supply routes. Economists warn that maintaining the MBG programme while managing rising fuel costs could lead to a breach of the country's fiscal deficit cap of 3% of GDP. Dr. Piter Abdullah from the Prasasti think-tank suggests a more flexible approach to this cap, advocating for a five-year average instead of an annual limit.
Experts recommend prioritizing energy subsidies over the MBG programme to safeguard fiscal health. Muhammad Nalar Al Khair, an economist at Sigmaphi Research, proposes halting the expansion of the MBG kitchen network, which aims to increase from 19,188 to 35,000 kitchens by the end of 2025. Others suggest limiting the programme to primary schools and excluding affluent areas to better allocate resources.
Political Implications and Economic Impact
The MBG programme is not only an economic initiative but also a politically sensitive one. Nailul Huda from the Centre of Economic and Law Studies (CELIOS) highlights that many kitchens are operated by individuals affiliated with political parties supporting Prabowo, complicating efforts to scale back the programme. He argues that the government should evaluate the programme's effectiveness, noting its minimal contribution of only 0.06% to GDP.
Conversely, some economists, like Fakhrul Fulvian from Trimegah Sekuritas, defend the MBG programme as crucial for protecting purchasing power and supporting local economies. They warn that cutting the programme could harm small-scale supply chains reliant on it, particularly as these sectors are still recovering from economic downturns.
Official Statements and Future Considerations
Indonesian Finance Minister Purbaya Yudhi Sadewa has indicated that the government will reassess budgets across ministries to identify potential cuts, although he confirmed that funding for the MBG programme would remain unchanged for now. He emphasized the need for careful monitoring of oil prices and their impact on the budget deficit.
As Indonesia navigates these economic challenges, the balance between maintaining social welfare programmes and ensuring fiscal responsibility remains a contentious issue. The government's response to rising oil prices and its implications for the MBG programme will be closely watched by both economists and the public.
Verbatim Quotes
- “If global oil prices are allowed to fully pass through to domestic fuel prices, it would have a devastating impact on inflation, purchasing power and, ultimately, economic growth and unemployment,” — Dr. Piter Abdullah, Policy and Programme Director, Prasasti
- “We need fuel subsidies more than MBG to avoid high inflation and job losses,” — Mr. Nailul Huda, Economist, CELIOS
- “The scale of the MBG programme may need to be reviewed,” — Dr. Piter Abdullah, Policy and Programme Director, Prasasti
- “If the MBG budget is slashed or stopped entirely, the ripple effects wouldn’t just hurt the schoolchildren receiving the meals,” — Mr. Fakhrul Fulvian, Chief Economist, Trimegah Sekuritas
