THE Indonesian economy is threatened by a 5% growth trap. The World Bank predicts Indonesia’s economic growth will only reach 4.8% in 2025 and 2026. However, historical data and forecasts from international institutions warn that Indonesia is trapped in a 5% growth stagnation. This figure is far from President Prabowo Subianto’s goal of achieving 8% economic growth in 2029.
After a year in office, Prabowo deserves to evaluate his work program. Why was the work program that created economic growth of up to 5.12% in the second quarter of 2025 not felt by the public until the massive demonstrations at the end of last August? Then, how can 8% economic growth be achieved if Indonesia’s economic engine is only capable of producing 5% growth?
Prabowo is certainly aware of Indonesia’s economic problems. In his various speeches, he has repeatedly raised the issue of corruption. He frequently threatens criminal prosecution for corruption. “No one is above the law, including officials or party members,” Prabowo emphasized in his state address for the Indonesian Independence Day on August 15, 2025. In the natural resources sector, 3.1 million hectares of illegal palm oil plantations have been reclaimed, and 1,063 illegal mines have been prosecuted.
All the ills plaguing the Indonesian economy ultimately stem from financial issues. Therefore, the appointment of Purbaya Yudi Sadewa as the Minister of Finance, replacing Sri Mulyani, on September 8, offered a new hope. With his inherently cowboy-like and blunt demeanor, Purbaya immediately hit the ground running.
In contrast to Sri Mulyani’s cautious approach, Purbaya’s school of thought, or Purbayanomics, most prominently emphasizes, aside from liquidity, a more expansive and pro-market fiscal stance. The following quick-win steps have captured public attention and given a new hope to the Prabowo’s administration:
The first point is the diverting Rp 200 trillion from the Government’s surplus budget (SAL) held in Bank Indonesia (BI) accounts to state-owned banks to pump liquidity into the country’s far-reaching banking system. The second point is the cutting transfer funds to regions to curb waste and redirecting them to productive assets. According to Purbaya, the Government’s spending, both central and regional, must impact the real sector, not be ceremonial. In the 2025’s regional inflation control coordination meeting, Purbaya urged governors not to hoard surpluses.
The third point is not increasing cigarette excise and postponing plans for new marketplace taxes and income tax. The goal is to prevent the cigarette industry, which employs a significant workforce, maintain public purchasing power, and maintain the stability of digital businesses. Despite the loss of potential tax revenue, Purbaya rejects the idea of widening the fiscal deficit to maintain fiscal credibility and the value of the rupiah. He is optimistic that tax revenue will increase with accelerated economic growth.
The fourth point is opposing the long-standing practice of allowing state funds to languish in deposits, where the interest is suspected to be enjoyed by a few people. Public funds should circulate for the people to stimulate the economy. He will thoroughly investigate the alleged interest manipulation of government time deposits in commercial banks, which has continued to rise since December 2024, reaching Rp 204.1 trillion to Rp 285.6 trillion as of August 2025. He will also investigate the deposit of funds by regional governments in commercial banks, which reached Rp 234 trillion as of September 2025, which should be spent to stimulate the regional economy.
The fifth point is that he is shaking up his staff at the Directorate General of Taxes by eliminating 39 officials suspected of tax extortion. He is also ready to clean up the Directorate General of Customs and Excise, long known to the public as a “hotbed of extortion” and even frozen during the New Order era. To make improvements and increase transparency, Purbaya has opened a complaints hotline for tax and customs services called “Lapor Pak Purbaya” at 0822-4040660.
Purbaya also criticized Danantara Indonesia, which he believes uses state-owned enterprise (SOE) dividends to purchase government bonds rather than invest in the real sector. A SOE, Pertamina, has also been the target of criticism. Pertamina is considered lazy in building oil refineries, resulting in a waste of foreign exchange due to high fuel imports.
A source of Infobank, a former Pertamina official, also agreed with the statement. Pertamina has not built any new oil refineries and continues to extract oil from Indonesia to ship and produce it in Singapore, then import it for sale in Indonesia. “They were either deliberately not built, or the fuel production from refineries in Indonesia did not meet standards, thus providing a justification for fuel imports,” he said several months ago. According to the source, Pertamina was preoccupied with downstream activities, which generate significant economic rents, rather than building competency to develop the upstream oil and gas sector.
As a result of the mismanagement of crude oil and fuel imports, corruption has been uncovered, resulting in state losses of up to Rp 285 trillion, including vessel and terminal leasing, excessive fuel prices, and profits from imports exceeding quotas. Businessman Riza Chalid, a suspect and a fugitive abroad, along with his son, is suspected of interfering with PT Patra Niaga to lease Terminal Bahan Bakar Minyak/the Fuel Terminal (TBBM) through PT Orbit Terminal Merak (OTM), thereby reaping profits of up to Rp 2.9 trillion.
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In contrast to Sri Mulyani’s cautious approach, Purbaya’s school of thought, or Purbayanomics, emphasizes a more expansive and promarket fiscal approach, aside from liquidity. |
TO CHASE LOST REVENUE SOURCES
For nearly three decades, Indonesia has failed to achieve 7% economic growth. Yet, Indonesia is incredibly rich in various natural resource commodities. It has the largest nickel reserves in the world, the second-largest tin reserves, the sixth-largest coal reserves, a super-rare rare earth elements, and a host of other commodities such as palm oil, rubber, and fisheries.
With this wealth of natural resources, Indonesia should be free of poverty. The state could obtain revenue to build infrastructure and provide free nutritious food without debt and the constant pursuit of taxes that make the public anxious ang angry. Unfortunately, this wealth has not had an impact on state revenues.
So where did the abundant natural resource wealth go so that the Government needs to do brutal pursuit of tax revenue to finance state spending, which in 2025 amounted to Rp 3,621.3 trillion, 37.85% of which was to be used to repay debt?
In 2014, when he first took office, President Joko Widodo ( Jokowi) promised to eradicate the natural resource mafia by establishing a Natural Resource Mafia Task Force. However, his promise was never realized. One of the modus operandi of the natural resource mafia is illegal mining and trade misinvoicing of export-import transactions, particularly commodities, to avoid taxes by eroding the tax base and shifting profits. Potential state revenue from royalties and taxes is lost due to these practices.
According to a report by the International Energy Agency (IEA), Indonesia recorded a coal export volume of 558 million tons in 2024. However, the Central Statistics Agency (BPS) recorded the value of coal exports at only US$ 30.48 billion. This means the statistically recorded price is US$ 54.62 per ton. Meanwhile, the average price of coal on the international market reached US$ 136.41 per ton last year. This represents a price difference of US$ 81.79 per ton, with a value of US$ 45.64 billion.
The horrific situation occurred in 2022, when global coal prices peaked at an average of US$ 403.71 per ton. However, the statistical value of Indonesia’s coal export volume, which reached 465.74 million tons, was only US$ 54.57 billion, or a statistical price of US$ 117.18 per ton. This resulted in a discrepancy of US$ 133.46 billion in unrecorded exports.
This indicates export under-invoicing, where the recorded export value in Indonesia is lower than the actual import value in the export destination countries. This discrepancy persists every year. According to data from Infobank Research Bureau, compiled from various sources, if we calculate the value of unrecorded coal exports over the 12 years from 2013 to 2024, the collective value reaches US$ 495.98 billion, or approximately Rp 8,084 trillion, using an exchange rate of Rp 16,300 per US dollar.
With a 2.5% income tax (PPH) and a 5% royalty, the lost state revenue amounts to Rp 606.30 trillion. That’s not just coal, not to mention other commodities like copper, lignite, and palm oil. It also doesn’t include potential lost revenue from illegal imports or smuggling, and even if it did go through official channels, there’s suspected over-invoicing.
In the palm oil sector, the state has successfully confiscated Rp 13.25 trillion from corruption in the granting of export facilities for crude palm oil (CPO) and its derivatives. The confiscated goods came from Wilmar Group, Musim Mas Group, and Permata Hijau Group. The total loss due to CPO corruption is Rp 17 trillion, but Rp 4.4 trillion remains unrecovered.
It’s deeply saddening that the loss of money from natural resource commodities is so substantial, yet the state receives so little revenue. The Government has long been aware of this. This is the first time a government official has publicly revealed the existence of misinvoicing practices that are detrimental to the state. The public now awaits how Purbaya Yudhi Sadewa will crack down on the illegal excise players and the shadow economy behind the illicit export of mining and commodities, which have been widely known to have many “jeger” (thugs) behind them.
On numerous occasions, Purbaya has stated that his actions are aimed at saving the people’s money. However, Purbaya certainly can’t do it alone. His outspoken style and blunt language can irritate certain parties, especially those who have benefited from collusion between officials and businesspeople.
However, The President, Prabowo, must support Purbaya, who claims to have no political interests. Moreover, Prabowo’s administration, just a year old, is already burdened by the obligation to repay the staggering debt inherited from the Jokowi’s administration. By 2026, the Government must repay maturing debt of Rp 833.9 trillion and interest of Rp 599.4 trillion. This surpasses the debt maturing in 2025 of Rp 800.3 trillion and interest of Rp 552.9 trillion.
Amid fiscal pressures and the ambition to achieve 8% growth in 2029, the Government must have a pragmatic growth strategy by maximizing state revenues, closing leaks, and creating market demand to drive economic growth. If the state’s financial leaks and lost revenues are allowed to continue, Indonesia will remain trapped in a debt trap and stagnate at 5% economic growth.
After a year in office, Prabowo deserves to evaluate his work program. Why was the work program that created economic growth of up to 5.12% in the second quarter of 2025 not felt by the public until the massive demonstrations at the end of last August? Then, how can 8% economic growth be achieved if Indonesia’s economic engine is only capable of producing 5% growth?