Finance Minister Sri Mulyani Indrawati has explained the controversy surrounding the adjustment of the budget amounting to Rp 50 trillion (US$3.17 billion) that was made weeks before the Feb. 14 general election under the instruction of President Joko “Jokowi” Widodo.

The ministry issued in December a circular to other government institutions and agencies instructing them to reserve allocation of 5 percent of their budgets in a fiscal mechanism called an automatic adjustment. The budget was aimed at anticipating a geopolitical situation. The circular did not specify the items that would be purchased under the budget, only expressing that it could be used for goods and capital spending. It also stipulated that the budget adjustment was instructed by the President.

“An automatic adjustment is used as a precaution. We’ll see. Like last year when the situation got better and priorities were achieved, we will also tell the institutions,” she told reporters on Wednesday.

Sri Mulyani said there was nothing irregular about the mechanism, saying that the government had used it since 2022 to cover urgent and unexpected spending that has not been covered in the state budget document. In 2022, the government allocated the adjustment to respond to a surge in cooking oil prices. In 2023, the government allocated the budget to repair damaged roads as part of its efforts to improve the infrastructure and connectivity in the country.

The former World Bank managing director assured that the allocation would not disrupt expenditure in government institutions since historically each institution only spent on average 95 percent of its budget by the end of each year. She also emphasized that the policy was not a budget cut, but an existing budget mechanism the government could use in case of unforeseen circumstances.

At the peak of the controversy of frequent social assistance (Bansos) distributed directly by the President toward the election and his alleged bias to presidential candidate Prabowo Subianto, critics had voiced concern that the budget adjustment would be used to direct more social assistance to support the candidate.  

Experts say there is little justification for continuing the Bansos program this year, as the Indonesian economy has performed relatively well over the past few years and global uncertainty has lessened, as demonstrated by declining commodity prices and expectations that central banks will begin cutting their rates.

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