Free Nutrition Eating Program Risks The State Budget Deficit Of Up To 3.34 Percent In 2029

JAKARTA The Free Nutrition Food Program (MBG) is Prabowo-Gibran's flagship program, as part of efforts to improve the quality of human resources.

The MBG program aims to provide nutritious food for 82 million recipients, including school children, students, toddlers, and pregnant women.

The MBG program is allocated through an education budget that cuts nearly 10 percent of the total 2025 national education budget or equivalent to IDR 71 trillion.

Although MBG has an impact on the economy, the Center for Economic and Law Studies (CELIOS) warns that this large budget allocation has the potential to burden state finances and reduce fiscal space for other priority programs.

BELIOS Economics Director Nailul Huda revealed that the MBG program modeling results if using education funds would only have a positive impact on national GDP by 0.06 percent or Rp7.21 trillion, but on the other hand, it had a negative impact on the education sector with an economic loss value of Rp27.03 trillion.

Huda added, if the MBG program uses mandatory spending education, it is feared that the quality of national education will be disrupted because the budget is reduced.

In addition, Huda said that the other negative impacts will also be felt by the workforce in the form of reducing compensation by Rp27.03 trillion and inseparable from the reduced labor income in the field of government education by Rp41.55 trillion.

"Meanwhile, the redistibution of these funds has the potential to reduce job opportunities to 723 thousand positions in the education sector, including teachers and lecturers," he said in his statement, Wednesday, November 20.

Huda stated that it is necessary to rationalize the free nutritious food program to be given to people in need through the Family Hope Program (PKH) scheme.

"Aid can be given through cash or nutritious food assistance for certain students," he said.

Similarly, the Executive Director of CelIOS Bhima Yudhistira stated that the CelIOS Study estimates that if the MBG program continues to run until it reaches the 100 percent target by 2029, the state budget deficit is expected to reach 3.34 percent of GDP in 2029 exceeding the safe threshold set by law with the assumption of 5 percent economic growth.

"When using the optimistic assumption of economic growth of 7 percent, the budget deficit is still predicted to exceed the constitutional provisions, which is 3.1 percent," he said.

Bhima advised the government to be more creative in seeking funding for MBG, not to increase the VAT rate to 12 percent to finance priority programs.

According to Bhima, there are many ways that can be done, one of which is wealth tax which can contribute IDR 81.6 trillion in one application. Then prevent tax leaks in the extractive commodity sector (underinvoiting and miss-reporting).

"We hope that the government will not sacrifice middle class people whose lives have been squeezed to finance MBG," he said.

CelIOS Dyah Ayu Economics Researcher revealed that the MBG program presents big challenges in terms of financing needs, especially those from taxes and debts. The tax ratio is difficult to rise to an economic situation full of external challenges and a weakening of middle class consumption.

"The project of decreasing Indonesia's tax ratio in the 2025 State Budget, which is only targeted at 10.09 percent, is still far from the 23 percent ambitious target in 2029," he explained.

According to Dyah, if it is not balanced with an effective strategy to increase state revenue, ambition to fund the MBG program could be an additional burden that widens the budget deficit.

The only option is to increase the tax ratio or increase the debt for MBG funds.