By: Gavin Asadit )*
The central government launched a series of economic stimulus measures in mid-September 2025, designed to expand fiscal space and encourage more inclusive economic growth. The policy package combines liquidity distribution through state banks, fiscal incentives for MSMEs and the tourism sector, and labor-intensive programs targeting villages and regions affected by the economic slowdown.
In a move that has garnered market attention, the Ministry of Finance has instructed the transfer of the majority of state funds previously held at Bank Indonesia, amounting to Rp200 trillion, to several state-owned banks to increase liquidity and accelerate credit distribution to the real sector. The government emphasized that this fund aims to increase financing for MSMEs, affordable housing, and labor-intensive programs without significantly altering the state budget deficit.
Bank Mandiri Chief Economist Andry Asmoro assessed that the 8+4+5 stimulus package offers significant potential to maintain short-term consumption while simultaneously expanding sustainable job creation. He emphasized that the program’s effectiveness will be largely determined by the speed of disbursement and the quality of oversight. He believes that if implemented effectively, the stimulus will not only strengthen public purchasing power but also have the potential to expand fiscal space by increasing tax revenues due to faster growth.
In addition to the liquidity injection, the government released a stimulus package that included food aid, a “cash for work” program, insurance subsidies for online motorcycle taxi drivers and truck drivers, and an extension of the 0.5% final tax rate for MSMEs until 2029. The package, announced on September 15, 2025, was recorded as worth around IDR 16.23 trillion and was designed to protect the purchasing power of 18.3 million families and absorb temporary labor through small-scale infrastructure projects.
The government emphasized that the combination of fiscal policies and measures to facilitate credit distribution is expected to boost economic growth in the fourth quarter of 2025 toward the annual target. The Coordinating Minister for Economic Affairs stated that this package aims to maintain consumption momentum while encouraging local job creation. On the monetary side, Bank Indonesia has eased interest rates throughout 2025, thus improving the space for more expansionary fiscal policy.
The government stated that these measures could increase “real fiscal space” without materially widening the deficit. Optimizing the absorption of budget funds, which have tended to be stagnate at Bank Indonesia, is believed to increase economic growth while simultaneously boosting tax revenues, resulting in a neutral, and potentially positive, medium-term impact on the deficit. Finance Minister Purbaya Yudhi Sadewa emphasized that this strategy of utilizing stranded funds is a form of optimizing budget absorption to immediately impact the economy. According to him, this step allows the government to stimulate the economy without significantly increasing the deficit.
A key feature of the stimulus package is its emphasis on inclusivity: a plantation redevelopment program projected to create millions of jobs by 2026, tax relief and food assistance to millions of families, and training/apprenticeship programs for young workers. These measures demonstrate a policy shift toward stimulating growth that not only boosts aggregate demand but also enhances the productive capacity of vulnerable communities and micro-enterprises.
The government is also targeting the formation or funding of village cooperatives to strengthen local supply chains, an initiative funded by state-owned banks receiving liquidity injections. Such initiatives, policymakers argue, will help spread the benefits of growth to the grassroots level and reduce regional disparities.
Despite its inclusive goals, a stimulus package of such a broad scale and scope poses several challenges. First, there is the risk of budget leakage if oversight is weak. Second, there is the potential impact of domestic inflation if demand accelerates while the supply of goods and services remains stagnant. Third, the synergy between fiscal and monetary policies needs to be continuously monitored to prevent medium-term macroeconomic imbalances. Experts emphasize the importance of measuring impact through indicators such as credit distribution to MSMEs, job creation, and household consumption realization.
The 2025 stimulus package marks a shift in Indonesia’s fiscal strategy toward a more proactive approach: increasing bank liquidity, strengthening direct and labor-intensive assistance, and prioritizing MSMEs and employment. If implemented and monitored promptly and accurately, this policy has the potential to significantly expand fiscal space by increasing economic activity and state revenues while upholding the principle of inclusivity so that the benefits of growth are felt at the village level.
)* The author is an observer of social and community issues
