Presidential Instruction No. 1 of 2025: Driving Efficiency in National and Local Budgets

On January 22, 2025, the President of the Republic of Indonesia issued Presidential Instruction (Inpres) Number 1 of 2025. This strategic directive is aimed at maximizing budget efficiency within the National Revenue and Expenditure Budget (APBN) and the Regional Revenue and Expenditure Budget (APBD) for the 2025 fiscal year. This instruction is addressed to all high-level officials, including Ministers, the Commander of the TNI, the Chief of National Police, the Attorney General, and regional heads, to ensure a disciplined fiscal environment across the entire nation.

Core Objectives of Inpres No. 1 of 2025

The primary goal of this instruction is to ensure that every Rupiah spent contributes directly to national development and public service excellence. The government aims to shift away from consumptive spending toward productive and measurable outputs. This inclusive fiscal approach ensures that resources are allocated where they are most needed, particularly for the welfare of residents in all regions.

Key Provisions and Responsibilities

The instruction outlines specific duties for various administrative levels to achieve significant savings:

1. Review and Optimization: Ministers and Heads of Agencies are tasked with reviewing all expenditure plans to eliminate redundancies. Regional heads (Governors, Regents, and Mayors) are specifically instructed to limit spending on seminars, honorariums, and activities that lack measurable outcomes.
2. Ambitious Savings Targets: The government has set a massive efficiency target of Rp256.1 trillion for Ministries/Agencies and Rp50.6 trillion for transfers to local regions.
3. Priority Spending: Efficiency measures will focus on non-loan and non-grant budgets, prioritizing funds for essential public services such as healthcare, education, and basic infrastructure.
4. Supervision and Governance: The Minister of Finance holds the authority to adjust budget allocations, while the Minister of Home Affairs oversees the APBD implementation to ensure transparency and good governance at the local level.

The Impact on Village Governance and Funds

A critical point within Inpres No. 1 of 2025 is found in the Fifth Dictum. The Minister of Finance is instructed to manage the regional transfer allocation, which totals a staggering Rp50,595,177,420,000. Notably, Rp2,000,000,000,000 of this efficiency target is attributed to Village Funds (Dana Desa).

As outlined in Law Number 62 of 2024 regarding the 2025 APBN, there was an initial allocation for the Village Incentive Fund (Dana Insentif Desa) worth Rp2 trillion. With the issuance of this new Inpres, it is highly probable that this specific incentive fund will face significant cuts or reallocation. For village administrations, this means that the 2025 fiscal year will require even more meticulous financial planning and prioritization to maintain local development momentum with more streamlined resources.

Challenges and Strategies for Village Leaders

While budget efficiency is necessary for national stability, it poses a challenge for village residents and officials. Village governments must now focus on inclusive development by ensuring that remaining funds are spent on high-impact projects. This is the time to strengthen community self-help (swadaya) and ensure that the Village Budget (APB Desa) remains responsive to the basic needs of the community, such as poverty alleviation and stunting prevention.

Conclusion: A New Era of Fiscal Discipline

Inpres Number 1 of 2025 marks a significant shift toward fiscal accountability and efficiency. By streamlining the national and regional budgets, the government aims to create a more resilient economy. For village stakeholders, staying informed about these regulatory updates is essential for adjusting local development strategies and ensuring that the 2025 programs remain effective despite the efficiency measures.