AmCham Update Vol. 7 #100

Indonesia Plans Free State Education for All, DPR Panel Moves 2027 Draft Budget to Plenary Stage, BI Holds Interest Rate Steady, Free Bank Account Program on Hold, Gibran’s 2024 VP Candidacy Challenged

Sep 25, 2026

Gov’t Plans Free State Education for All

The government plans to finance free public schools through the existing 2027 education budget rather than create a new allocation, while continuing to assess the cost and implementation of free tuition at state universities.

President Prabowo Subianto announced on Sep 18 that the government would pursue free education at state schools from kindergarten through senior high school, as well as free tuition at state universities. A limited cabinet meeting on Sep 23 discussed implementation options and the required financing.

“It was the president’s directive to provide free education services for students at state schools, as part of his commitment that all Indonesian children have the right to quality education,” Elementary and Secondary Education Minister Abdul Mu’ti said after the meeting.

Finance Minister Suahasil Nazara said the 2027 Draft State Budget allocates around Rp 820.9 trillion ($46 billion) for education. The government plans to redesign the allocation to accommodate the program.

“The question is how to properly design the utilization of this budget, which exceeds Rp 800 trillion,” Suahasil said on Sep 23.

The government has yet to finalize the program’s funding requirements. The higher-education component is also still under study.

House of Representatives (DPR) Budget Agency Chairman Said Abdullah said implementation was targeted to begin gradually in 2028. He estimated preliminary costs at around Rp 210 trillion for free education from elementary through senior high school and Rp 92 trillion for state universities.

The government is also considering how to improve education quality alongside access. Abdul Mu’ti said the program would build on the Smart Indonesia Program (PIP) and School Operational Assistance (BOS), which covers around 164,000 state schools from kindergarten through senior high school.

Experts have questioned whether the policy might compromise education quality or fiscal sustainability. Cecep Darmawan, an education policy expert at the Indonesia Education University (UPI), said the government should target students from low-income and vulnerable groups, while carefully assessing its impact on the education budget.

Anggun Gunawan, Chair of the All-Indonesia Alliance of Academic and Vocational Lecturers (Adaksi), said education infrastructure and teacher welfare must also keep pace with rising student numbers.

“If the number of students increases but the number of lecturers doesn’t grow proportionally, facilities aren’t improved and lecturers’ welfare doesn’t increase, we risk having higher education that is more accessible but no better in quality,” he said.

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DPR Panel Moves 2027 Draft Budget to Plenary Stage

The DPR budget panel approved the 2027 draft budget on Sep 24 with total government spending of Rp 4,106.3 trillion ($231 billion) and the fiscal deficit forecast at 2.40 percent of GDP, Committee Chairman Said Abdullah said.

The committee also approved a state revenue target of Rp 3,435.1 trillion.

The measure will now move to plenary approval in the DPR.

Both spending and revenue were Rp 9.1 trillion higher than the initial budget proposal submitted by President Prabowo Subianto last month.

The higher spending was due to an increase in allocations for ministries and agencies, according to Said. The revenue target was raised to keep the fiscal deficit intact.

The state budget is being closely monitored by investors due to continuing concerns over fiscal discipline and debt levels. Budget worries have also added to pressures on the rupiah this year, which hit a record low against the dollar in June.

The rise of global oil prices in recent weeks has added to worries about the fiscal outlook and renewed pressure on the currency.

The predicted cost of fuel subsidies was lowered by Rp 11 trillion to Rp 261.5 trillion, or just over 6 percent of total spending, because of improvements in fuel distribution.

In other adjustments, defense spending has increased by Rp 6 trillion to 335 trillion rupiah, around 8 percent of total spending, and education spending has increased by Rp 14 trillion to 497 trillion rupiah, around 12 percent of %u2060total spending.

At 2.4 percent of GDP, the forecast deficit is lower than the 2.85 percent expected this year, which is still within the legal limit of 3 percent of GDP.

A plenary vote on the measure is expected on Sep 29.

Most 2027 economic assumptions are unchanged, for 2027 remained unchanged, %u2060with GDP growth set at 6 percent, inflation projected at 2.5 percent, and the rupiah presumed to average 17,500 to the US dollar.

Subianto plans to boost revenue through greater proceeds from natural resources %u2060supported by a planned commodity exchange to set prices and a new export firm under Danantara that will monitor key shipments.

A draft bill accompanying the budget includes a plan to charge an excise tax on sugary drinks. Finance Minister Suahasil Nazara, speaking to reporters, did not provide details.

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BI Holds Interest Rate Steady

Bank Indonesia (BI) has kept its benchmark interest rate unchanged despite high global energy prices and a recent rate hike by the United States Federal Reserve, while relying on hedging to protect the rupiah.

Following the central bank’s monthly policy meeting, BI Governor Destry Damayanti said on Sep 23 that the BI rate would remain at 5.75 percent, where it has been since June. The decision had been expected.

“This decision is consistent with the strategy to stabilize the rupiah exchange rate amid strong external pressure to keep inflation within the government’s target range of 2.5 plus/minus 1 percent in 2026 and 2027 and to push for sustained economic growth,” Destry said.

In a presentation on the meeting’s outcome, BI Senior Deputy Governor Aida Budiman said the domestic economy was not overheating. A rate increase was therefore considered inappropriate.

The central bank has now left its key interest rate unchanged for three consecutive months, after multiple rate hikes totaling 100 basis points (bps) in May and June to stabilize the rupiah.

After hitting a historic low of 18,209 to the US dollar in June, the rupiah is currently hovering around 17,800.

To stabilize the currency and maintain liquidity, BI aims to attract foreign money into the country in the form of portfolio investment, offshore bank loans and foreign direct investment (FDI).

Under the new policy, it is increasing incentives for hedging swaps and domestic non-deliverable forward (DNDF) transactions. It is also introducing diversified foreign exchange transactions through incentives for local currency transactions with partner countries.

Fakhrul Fulvian, chief economist at Trimegah Sekuritas Indonesia, told The Jakarta Post on Wednesday that keeping the interest rate unchanged enables BI to use other instruments to tackle foreign exchange rate risks. Raising incentives for hedging swaps aims to bolster foreign investment portfolios.

“BI is starting to separate the price of money from the cost of foreign exchange risk. The BI rate is used to maintain inflation credibility and macroeconomic stability, while swaps and DNDF can be used more specifically to reduce the cost of foreign exchange risk and attract external funding,” he said.

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Prabowo’s Free Bank Account Program on Hold

The Indonesian government’s ambitious plan to provide free bank accounts to all citizens aged 17 and above has been put on hold, as authorities refine the operational framework to ensure the new accounts remain active, Coordinating Minister for Economic Affairs Airlangga Hartarto said on Sep 23.

The initial announcement said the program would be launched this year. “We are still discussing it this year,” Airlangga said.

Airlangga said the government is preparing a budget of around Rp3.8 trillion (US$213.48 million) to fund an initial balance of Rp 50,000 (US$2.81) for each account.

“We want to review with the Finance Minister what kind of follow-up programs are appropriate. We know that existing social assistance is typically provided to married individuals. So, for those aged 17 and above who are unmarried, we are looking at what programs can be offered to ensure their accounts do not become dormant,” Airlangga said.

President Prabowo Subianto has directed that financial inclusion and literacy must increase by giving every citizen access to formal banking services.

Under the scheme, the government plans mass account openings through state-owned lenders Bank Rakyat Indonesia (BRI) and Bank Syariah Indonesia (BSI).

To streamline implementation and broaden coverage, the government plans to synchronize population data from the Home Affairs Ministry’s Population and Civil Registration System (Dukcapil) directly with Bank Indonesia’s payment and gateway infrastructure, including the Quick Response Code Indonesian Standard (QRIS).

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Gibran’s 2024 VP Candidacy Challenged over Education Requirement

The Constitutional Court (MK) is examining a petition challenging Indonesian Vice President Gibran Rakabuming Raka’s 2024 candidacy over his education credentials. A group of petitioners are asking the Court to rule that he should not have been allowed to contest the 2024 election.

The case centers on whether Gibran, 38, had completed the equivalent of senior high school, which is required for presidential and vice-presidential candidates in Indonesia.

The petition, submitted on Sep 10 by former Deputy Minister of Law and Human Rights Denny Indrayana and 11 others, argues the credential requirement was not met at the time candidates registered and were formally designated. They are asking the Court to invalidate Gibran’s candidacy and annul his inauguration as vice president.

The dispute centers on Gibran’s overseas education, including his studies at Orchid Park Secondary School in Singapore and the University of Technology in Sydney. The petitioners have questioned the government-issued equivalency certificate that states Gibran completed Grade 12 at UTS and that his education was equivalent to an Indonesian high school qualification. They also question the documents used as the basis for issuing the certificate.

Denny said the certificate was obtained by the petitioners only in 2026 following a public-information inquiry.

The petition also challenges Article 18 (3) of General Election Commission (KPU) Regulation 19/2023, which provides an exemption from submitting proof of secondary-school graduation for candidates who studied abroad and hold proof of higher education. The petitioners argue that holding a university qualification should not remove the separate statutory requirement to have completed a secondary education.

During a Constitutional Court hearing on Sep 23, the KPU argued that the case concerns an electoral-process dispute that should have been handled through the Election Supervisory Agency (Bawaslu), rather than through an election-results dispute before the MK. The KPU also argued that the petition’s request to annul Gibran’s inauguration effectively falls under the constitutional impeachment mechanism.

Meanwhile, former President Joko Widodo said he would respect the legal process while providing his account of Gibran’s education, saying that Gibran attended Orchid Park Secondary School before continuing through UTS in Australia and later studying at the Management Development Institute of Singapore.

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Update is AmCham’s regular newsletter on developments related to investment, the economy, regulations and issues related to doing business in Indonesia. It comes out three times a week. It is edited by AmCham Managing Director Donna Priadi and written by the AmCham Staff.

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