By KUSNANDAR & CO., Attorneys at Law – Jakarta, INDONESIA
Finance Minister
Purbaya Yudhi Sadewa’s recent remarks on budget efficiency mark a significant
shift in how Indonesia’s government interprets fiscal management. He made it
clear that he would not impose budget blocking or spending cuts, practices
commonly associated with his predecessor, Sri Mulyani Indrawati. For Purbaya,
efficiency does not mean trimming budgets—it means ensuring that public funds
are used as intended, on time, and free from corruption. “Efficiency means
making sure the money is spent for its purpose, on time, and not stolen,” he
said.
What seems like a
managerial statement actually carries deep legal and policy implications.
Purbaya is redefining the traditional concept of efficiency—not as saving cash,
but as optimizing the public benefit derived from every rupiah of state
spending. Under Sri Mulyani, efficiency was implemented through Minister of
Finance Regulation (PMK) No. 57/2025, which authorized the ministry to
determine specific efficiency targets for each government agency. The policy
often translated into spending cuts on goods and capital expenditures, all in
the name of fiscal discipline. Legally, that approach was legitimate—it aligned
with Law No. 17/2003 on State Finance, which allows budget adjustments to
maintain fiscal stability. Yet, in practice, sudden cuts frequently caused
uncertainty, delaying contracts and slowing public spending.
Purbaya’s approach
moves in the opposite direction. He rejects efficiency through budget cuts and
instead focuses on cash management efficiency—ensuring that idle funds do not
accumulate and burden the state with unnecessary interest payments. “If Rp400
trillion is idle, at a 6 percent interest rate, that’s Rp24 trillion lost,” he
explained. This concept of efficiency is actually closer to the legal
definition embedded in Article 3 of Law No. 17/2003, which requires public
finances to be managed efficiently, economically, effectively, transparently, and
responsibly. Efficiency, in this legal sense, means maximizing outcomes with
minimal resources—not simply cutting costs.
As the State
General Treasurer, the finance minister has the authority to manage and
allocate state cash positions under Law No. 1/2004 on State Treasury.
Therefore, reallocating funds without altering the state budget structure is
entirely within the law. Furthermore, Purbaya’s decision to abandon the
long-standing practice of budget blocking enhances legal certainty for
ministries and agencies. Without the fear of sudden revisions, programs can be
executed more smoothly. In administrative law terms, this approach helps reduce
fiscal maladministration that often arises from mid-year policy changes.
Still, this
paradigm shift is not without challenges. The government must revise or revoke
PMK 57/2025, which still legitimizes across-the-board spending cuts, to prevent
regulatory contradictions. At the same time, better oversight mechanisms are
essential. Moving funds around without changing budget allocations requires
transparency and real-time monitoring to avoid misuse. Without robust internal
audits, the “relocation” of idle funds could create new vulnerabilities in
public finance governance.
Purbaya’s version
of efficiency represents a reform in Indonesia’s fiscal philosophy: from
nominal efficiency to substantive efficiency. It replaces the obsession with
spending cuts with a focus on performance and accountability. This shift calls
for bureaucrats to stop asking, “How much can we cut?” and instead ask, “How
effectively are we spending?” In legal and policy terms, this aligns with
Indonesia’s long-standing aspiration toward performance-based budgeting—a
principle that measures efficiency by outcomes, not reductions.
True efficiency in
public finance is not about how little the government spends, but how wisely it
uses public money. Purbaya offers a more rational and legally coherent vision:
efficiency as fairness and precision in the use of state funds. The real test,
however, lies in consistency. Without fiscal discipline, transparency, and
inter-agency coordination, this new model of efficiency risks ending up like
the old one—a promising reform stranded in bureaucratic inertia.
K&Co - October 8, 2025
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