Govt. to Allocate IDR 400 Trillion for 2026 Free Meal Program

The government aims to increase the 2026 free meals budget nearly six times from this year's initial figure of IDR 71 trillion to cover around five times this year's target of 17.5 million recipients, while it looks for an extra IDR 100 trillion to fund the program until the end of 2025.

The government plans to allocate IDR 400 trillion (USD 24.68 billion) for the free nutritious meal program next year to reach 82.9 million recipients, the head of the National Nutrition Agency (BGN) has said.

The figure is nearly six times more than this year’s budget of IDR 71 trillion for a target of 17.5 million recipients.

“Next year, because [the target is] 82.9 million, from January to December [the budget will be] IDR 400 trillion,” BGN head Dadan Hindayana said on Wednesday after a cabinet meeting at the State Palace in Jakarta, as quoted by Kontan.co.id.

Since it was launched on Jan. 6, the free meal program has reached 650,000 schoolchildren in 31 provinces.

President Prabowo Subianto has expressed optimism that the program would reach all Indonesian children by the end of 2025, with a progressive target of 3 million, 6 million and 15 million children by April, August and September, respectively.

Dadan said the government might need an additional budget of IDR 100 trillion for this year’s free meal program to meet the President’s latest directive to expand the full-year target to 82.9 million recipients.

This estimate would apply if the expansion efforts began in September, he explained, “But if, for example, [the gradual expansion] started in October or November, it could be less than that.”

It is unclear if the President has approved the additional budget.

Finance Minister Sri Mulyani Indrawati said on Wednesday that the ministry was identifying potential funds that could be reallocated to meet the additional amount needed to expand the free meals program.

Meanwhile, Home Affairs Minister Tito Karnavian suggested that one option would be for municipal or provincial administrations to use their budgets to cover additional spending of up to IDR 5 trillion, Reuters reported.

The government closed last year with an unspent budget of IDR 45.4 trillion, which could be used to plug part of gap in this year's free meals program.

During his campaign for the 2024 presidential election, Prabowo estimated a per year cost of IDR 450 trillion once his flagship free meals program was fully implemented.

Given the scale of spending for the new program, however, his administration decided to implement the program gradually this year with an initial budget of IDR 71 trillion.

Last February, Prabowo announced an expanded program to include pregnant women, though it remains to be seen how the government would manage the distribution of free meals to this recipient group in addition to schoolchildren.

The program has spurred controversy, with some analysts raising concerns it could undermine the country’s fiscal prudence and reputation due to the large funds needed to finance the program. They have also pointed to the challenge of raising tax revenue to cover the program’s costs in the short term.

Prabowo has defended the program as a strategic effort to combat childhood malnutrition and to encourage growth in regional economies.

The 2025 state budget has an estimated deficit of 2.53 percent of gross domestic product, below the legal limit of 3 percent.

Source: The Jakarta Post

Indonesia to Make Resource Exporters Hold All Proceeds Onshore for a Year

Indonesia will require natural resource exporters to hold all proceeds onshore for at least one year, its chief economic minister said on Tuesday, a move that could boost the country's foreign exchange reserves by USD 90 billion a year and support the local currency.

The new requirement will apply to every export with a shipping document worth at least USD 250,000, starting from March 1, said Minister Airlangga Hartarto.

Under current rules, exporters of natural resources such as coal, palm oil and nickel products are required to retain just 30% of such proceeds in the domestic financial system for three months.

The office of the Coordinating Ministry for Economic Affairs said the new requirements could increase Indonesia's foreign exchange reserves by USD 90 billion per year. The country's reserves were USD 155.7 billion at end-December.

"Conversion into rupiah can increase U.S. dollar supply. And without excessive intervention by the central bank through interest rates or dollar sales, this can reduce the rupiah's volatility," Airlangga said.

The rupiah this month hit its weakest against the U.S. dollar since July.

The proceeds could be used for business operations if converted into rupiah, Airlangga told reporters, while also encouraging exporters to swap their dollars for rupiah or borrow from banks if they are reluctant to convert.

The export earnings retention rules have been controversial since they were first introduced in 2023, praised by some bankers and analysts for boosting dollar liquidity but criticised by some exporters who said they needed to pay their bills.

To make it less painful for exporters, the central bank has been offering term deposit instruments with a competitive return.

Airlangga said capital gains from such term deposits would not be taxed under the new measure.

The executive director of the Indonesian Mining Association, Hendra Sinadia, said even the current retention level has disrupted cashflow.

"I hope this news of 100% retention won't become a reality," he said.

Palm oil companies could comply if their funds are accessible when converted into rupiah, Eddy Martono, the chairman of industry association GAPKI, said, although he warned of potential currency loss.

Source: Reuters

ExxonMobil to Invest Up to USD 15 Billion in Indonesian Carbon Storage, Petrochemical

American oil giant ExxonMobil has agreed to invest up to USD 15 billion for carbon capture and storage or CCS as well as a petrochemical refinery in Indonesia.

The company and the Indonesian government inked a memorandum of understanding (MoU) on the project in Jakarta on Wednesday.

Senior minister Airlangga Hartarto told reporters that ExxonMobil’s petrochemical investment would support Indonesia’s push for value-added processing. The petrochemical facility is set to produce plastic. The CCS -- which captures emissions from industrial processes and stores them deep underground in geological formations -- will help Indonesia move the needle on sustainability.

“This project is expected to deliver a significant impact on various sectors in Indonesia. … It will create jobs and show the commitment to sustainability. This CCS technology is capable of absorbing 90 percent of the emissions [from industrial sources],” Airlangga said, shortly after the deal signing.

Airlangga’s aide Susiwijono Moegiarso revealed later that day that the initial investment would stand at around USD 10 billion before it finally totals USD 15 billion for both projects.

CCS facility is expected to store 3 million tons of carbon dioxide. Susiwijono claimed that it would also be the first large-scale CCS facility in Indonesia once operational. ExxonMobil has yet to decide on the location of both facilities. ExxonMobil is mulling setting up the CCS somewhere in the Sunda-Asri basin in the Java Sea. They are also still trying to find the best location for the petrochemical refinery, although it is likely to be situated on Java island.

“ExxonMobil is looking for a 500-hectare land for the petrochemical industry. We have some options around Java Island. Because they want the facility to be only 100 kilometers away from the CCS facility,” Susiwijono said.

The Indonesian government and ExxonMobil will also set up a joint task force to make sure everything goes well without a hitch.

Former President Joko “Jokowi” Widodo had previously hinted at ExxonMobil’s investment. In 2023, Jokowi met with ExxonMobil chairman Darren Woods in San Francisco. The two-term leader revealed that ExxonMobil was considering pumping USD 15 billion into a green petrochemical refinery and a CCS project in Indonesia. Jokowi at the time even claimed that the CCS facility would be the largest of its kind in Southeast Asia.

The government reported that Indonesia recorded USD 2.8 billion in foreign direct investment from the US in January-September 2024. This made the US as Indonesia’s fourth-largest source of FDI.

Source: Jakarta Globe