Government Spending Surge Fails to Deliver Strong Economic Boost

Record Expenditure with Limited Economic Impact

The Indonesian government's central expenditure, particularly through various ministries and government agencies (K/L), reached a record Rp 1,500.4 trillion by the end of December 2025. This figure represents 129.3% of the initial 2025 State Budget (APBN) target of Rp 1,275.6 trillion, marking a significant 14% year-on-year increase from the Rp 1,315 trillion spent in 2024.

Limited Economic Multiplier Effect

Despite the substantial increase in government spending, financial analysts suggest that the impact on economic growth remains relatively constrained. The government's ability to stimulate broader economic activity through its expenditure appears limited, potentially due to various factors including allocation efficiency and project implementation effectiveness.

Budget Increase for 2026

Looking ahead to 2026, the government has budgeted an even higher expenditure of Rp 1,510.5 trillion for K/L, compared to the 2025 APBN target of Rp 1,160.1 trillion. This continued upward trend in government spending suggests an ongoing commitment to fiscal stimulus, despite concerns about its effectiveness in driving economic growth.

Implications for Economic Policy

The pattern of increasing government expenditure raises important questions about the efficiency of public spending and its role in Indonesia's economic strategy. As the government continues to ramp up spending, there will be growing scrutiny on the effectiveness of these expenditures in achieving broader economic objectives.