–Feb 22, 2024
Two major credit rating agencies, Fitch Ratings and Moody’s, have raised concern that Prabowo Subianto’s expensive campaign promises could result in more expansionary fiscal policy. As the presidential hopeful, Prabowo plans to realize those programs by increasing the tax ratio, as well as setting up a new state revenue agency that would report directly to the president. However, the rating agencies believe such reforms may take time, while the implementation of the pledges may be imminent. Analysts warn that sudden increase in government spending to swiftly fulfil all of Prabowo’s promises could breach the budget deficit cap, which is set by law at 3 percent of GDP. They urge the former general to reveal the financing plans for his programs, as well as the potential impact on the fiscal position, to reassure markets. In his election campaign, Prabowo promised several big-ticket programs, such as continuing the construction of the new capital city, increasing defense spending and raising public servants’ salaries. The centerpiece of his campaign, free school lunches and nutritional support for 82.9 million people, would require some Rp 400 trillion (US$30 billion) per year, according to Dedek Prayudi, spokesperson for the youth division of Prabowo’s campaign team. That is equivalent to 12 percent of the entire state budget for this year and around 2 percent of the country’s GDP. Read more at: https://www.thejakartapost.com/business/2024/02/22/fitch-moodys-raise-concerns-about-fiscal-policy-under-prabowo-leadership.html.
