Author: Jati Pramono
Editor: Aria W. Yudhistira
Every budget cycle, the Indonesian public debates the numbers: how big the deficit is, where the largest allocations are, whether revenue targets have been achieved. The Supreme Audit Agency (BPK) audits whether state funds are being spent according to regulations. The Corruption Eradication Commission (KPK) pursues corruption. But there's one fundamental question no institution has ever systematically answered: does the state budget make society more equal, or does it actually make it more unequal?
In 2025, the Ministry of Primary and Secondary Education's budget will be cut by around 24%, while the Ministry of Health's budget will be cut by 18,5%. Some of these savings will be channeled to Danantara, the state investment management agency that currently manages assets worth US$900 billion.
At the same time, the Free Nutritious Meals program was launched, targeting 82,9 million beneficiaries, making it the largest social program under the current administration. Two major fiscal decisions, two opposing directions, neither of which has undergone an independent, publicly accessible distributive impact analysis.
Holes in the Surveillance Architecture
Indonesia has no shortage of oversight institutions. However, mapping their respective mandates reveals a glaring structural gap.
The Supreme Audit Agency (BPK) audits state financial reports to ensure funds are spent according to regulations, not to assess whether spending is progressive or regressive. The House of Representatives (DPR) Budget Agency provides political approval for allocations, but is not an analytical body. The Corruption Eradication Commission (KPK) addresses corruption, not legitimate fiscal policies that disproportionately harm certain groups.
Indonesia has adequate oversight of the legality and efficiency of state spending, but it lacks oversight of its fairness. This is not a minor loophole, but rather a structural loophole that allows major fiscal policies (Danantara, MBG, energy subsidies, downstream tax incentives) to escape distributive accountability. The government can claim every policy is "pro-people" without any independent institution to verify these claims with data.
Budget Justice Institute
The idea of independent budget institutions is not new globally. The Congressional Budget Office in the United States has been operating since 1974. The Office for Budget Responsibility in the United Kingdom was established after the 2008 financial crisis. As of 2021, the IMF recorded at least 51 independent fiscal institutions (IFIs) in 49 countries.
But most existing IFIs focus on costing: How much will a policy cost? Are government projections realistic? How will it impact the deficit? These are important, but not sufficient for Indonesia.
Indonesia needs an IFI with a broader mandate. An institution that carries out benefit-incidence analysis, which is about who benefits from each state expenditure, sorted by income decile, gender, region, and formal-informal employment status. Let's call this institution the fiscal ombudsman.
Not an ombudsman in the sense of overseeing public services, as the Indonesian Ombudsman does, but an ombudsman in the sense of safeguarding fiscal justice. An institution that ensures that budget choices are accountable not only legally and administratively, but also distributively.
Imagine if such an institution existed today. We would have answers to questions that no one currently has answers to: Will the 2026 energy subsidy benefit richer or poorer households more? How much? cost-per-beneficiary MBG compared to PKH, and which is more effective in reducing stunting?
What is the redistributive impact of cutting the ministry's budget to fund Danantara? How much? tax expenditure (tax incentives) flowing to the nickel downstream sector, and who are the final recipients?
These questions are not academic. They are the most fundamental political questions in a democracy: for whom the state works.
OECD Momentum
There's an additional reason why this idea isn't just talk, but a concrete policy opportunity. Indonesia is currently in the process of joining the OECD, an organization that prioritizes the existence of independent fiscal institutions as a crucial component of good fiscal governance.
The OECD notes that 35 independent fiscal institutions have been established in its 29 member countries. Indonesia does not yet have an institution with such a strong mandate. While a budget analysis function exists within the House of Representatives (DPR), it is insufficient to address the need for an independent mechanism to assess the distributional impact of tax policies, spending, subsidies, fiscal incentives, and public financing.
The stagnant tax ratio at around 10 percent of GDP, well below the ASEAN average (14%-15%) and the OECD average (34%), makes the need for fiscal equity oversight even more pressing. When fiscal space is tight, every rupiah allocated has a opportunity costs Without an institution that evaluates the equity dimension of these choices, budget efficiency simply means cutting more, not cutting more fairly.
Formation fiscal ombudsman can be deliverable concrete steps in the OECD accession process. Not an additional burden, but an institutional investment with direct domestic benefits.
Realistic Design
The need isn't for a new ministry, but for a streamlined corrective mechanism. A small, analytical unit with operational independence. Whether it's attached to the House of Representatives (DPR) like the Congressional Budget Office in the US, established under the Supreme Audit Agency (BPK), which already enjoys constitutional independence, or becomes an independent institution like the Office for Budget Responsibility in the UK, is a design question open to discussion. A non-negotiable requirement is independence: leadership appointed through an open and accountable process, not political appointments.
The main products are three. First, fiscal equity review annual review of the APBN, namely a comprehensive analysis of who pays and who receives from the state budget. Secondly,, rapid assessment on major fiscal policies, a kind of “equity impact test” before or immediately after the policy takes effect.
Third, tax expenditure report An annual report on how much state revenue is lost due to tax incentives and who benefits. Furthermore, this institution needs to open a public complaints channel so that citizens, civil society organizations, and vulnerable groups can voice their concerns about the impacts of fiscal policies.
Another crucial issue is data access. Without a memorandum of understanding (MoU) with the Ministry of Finance, BPS, and Bappenas to access budget and socio-economic data, these institutions will be paralyzed. This is a technical prerequisite, but also a political test: how serious the country is about its promise of fiscal transparency.
From Money Accountability to Justice Accountability
Indonesia has learned, the hard way, that the state budget must be audited and must not be corrupted. The Supreme Audit Agency (BPK) and the Corruption Eradication Commission (KPK) are the fruits of the 1998 reforms. The next step is more difficult but no less important: ensuring that the state budget is fair.
In the era of Danantara, massive budget efficiency, and massive social programs, fiscal justice institutions are no longer institutional luxuries. They are democratic necessities. Where does the public's money go? Someone has already answered. Meanwhile, for whom does the public's money work? It hasn't been answered yet.
This article has appeared on Katadata.co.id by title “Who Will Maintain Budget Fairness?”