Nazara's big test: Deliver 6 pct growth while keeping fiscal health

The challenge is to make the fiscal machine work more efficiently to support a larger development agenda and generate higher growth while safeguarding the health of state finances.

Jakarta (ANTARA) - When Suahasil Nazara was inaugurated to replace Purbaya Yudhi Sadewa, the reshuffle was sudden and abrupt. However, the change took place at a critical moment, as the government was drafting the 2027 State Budget (APBN).

Since August 14, at the parliament building, President Prabowo Subianto had affirmed two demands at once, pushing for higher economic growth while maintaining fiscal health.

The government has set an economic growth target of 6 percent for 2027, while the budget deficit is designed to fall to 2.40 percent of gross domestic product (GDP), compared with 2.68 percent in the 2026 state budget. At the same time, state expenditure is planned to reach Rp4,097.2 trillion, with state revenue at Rp3,426 trillion.

This combination gives an important clue about the work awaiting Finance Minister Nazara. He is not merely tasked with keeping state coffers safe. He must also ensure the state budget remains a tool capable of driving growth, investment, social protection, and various government priority agendas.

The new finance minister's challenge is not choosing between expansion and prudence, as both must move forward together.

That was the message he conveyed shortly after his inauguration. Nazara said President Prabowo had directed him to maintain the health and credibility of state finances while ensuring that the state budget could support the government's priority programs.

He affirmed that the budget deficit would be kept below 3 percent.

What makes Nazara's profile compelling is how well it fits the country's current economic challenges.

Prabowo did not choose someone who would need time to learn how the fiscal machine operates. Nazara has already spent years inside it.

With an academic background in economics, Nazara studied economics at the University of Indonesia before earning a master's degree from Cornell University and a doctorate from the University of Illinois Urbana-Champaign.

He went on to pursue an academic career before moving into economic and fiscal policymaking.

His government career reflects a gradual progression. He first served as acting head of the Fiscal Policy Agency (BKF) before being formally appointed to the position in 2016.

Three years later, he was appointed Deputy Finance Minister, a position he held throughout the Joko Widodo (Jokowi) administration.

He later returned as Deputy Finance Minister under the Prabowo administration before being entrusted with the Finance Ministry's top leadership post.

His years at the ministry have given him an understanding of how state revenue is calculated, spending is designed, financing is managed, fiscal policy interacts with monetary policy, and the government responds to crises.

When Nazara was inaugurated as BKF head in 2016, then-Finance Minister Sri Mulyani Indrawati emphasized that the quality of the state budget must enable it to serve as an effective instrument for managing the economy. The BKF was also urged to become a hub for fiscal policy thinking.

Nearly a decade later, Nazara is expressing a similar view: the state budget must be healthy, credible, and deliver tangible benefits for the public.

Nazara was inside the Finance Ministry when the Indonesian government implemented extraordinary policies during the COVID-19 pandemic, when the state budget deficit was widened to 6.1 percent of GDP.

At the time, the state budget had to remain anticipatory and flexible, while ensuring the deficit gradually returned to below the 3 percent limit. That experience shows that fiscal discipline does not always mean holding back spending.

In special circumstances, the state must be willing to spend large sums, while knowing the reasons, targets, and limits.

That is one of the differences between simply cutting spending and improving budget efficiency, as Nazara affirmed shortly after his inauguration.

Budget efficiency, he said, is not merely about cutting spending, but about using available funds to produce maximum output that benefits the public.

This thinking aligns with the vision behind the 2027 state budget draft. The government wants the economy to grow by 6 percent, while the deficit is instead lowered to 2.40 percent of GDP. In simple terms, the government wants more growth from every rupiah spent.

Nazara has previously described the combination of higher growth and a lower deficit as a sign of a more efficient state budget. According to him, every rupiah spent needs to generate a multiplier effect on the economy.

Minister Nazara faces two key tasks ahead. On one hand, the state budget must be able to stimulate economic activity. On the other, that economic activity must in turn generate greater revenue for the state.

Meanwhile, the government still has to contend with changing commodity prices, global financial conditions, geopolitical dynamics, and interest-rate movements that could affect the domestic economy.

In 2023, Nazara emphasized that the state budget must be responsive and anticipatory toward global risks, including inflation and rising interest rates.

His experience as an "insider" is a valuable asset for maintaining continuity in the fiscal system as the government enters an increasingly ambitious phase of development.

He already understands how fiscal policy is formulated. He has been on the policymaking side as BKF head and has worked alongside the finance minister as deputy minister.

He went through the pandemic, when the state budget had to operate with great flexibility, as well as periods of significant shifts in the global economic landscape. That experience is now being tested in a different context.

The challenge is to make the fiscal machine work more efficiently to support a larger development agenda and generate higher growth while safeguarding the health of state finances.

Related news: Minister Nazara's task is to make policy predictable: Economist

Related news: New finance minister reassures markets, says no major policy shift

Related news: New Finance Minister vows to keep Indonesia's deficit below 3 percent