Indonesia’s government under President Prabowo Subianto is preparing to overhaul its social assistance system by replacing in-kind subsidies with direct cash transfers averaging Rp5.4 million per recipient, according to Luhut Binsar Pandjaitan, head of the National Economic Council. The proposal, which aims to improve efficiency and targeting through digital transformation and artificial intelligence, has drawn both support and scrutiny from political circles.

Luhut’s spokesman, Jodi Mahardi, clarified that the reform is not intended to reduce existing social protection programmes but to integrate them into a more precise and transparent delivery system. Viewed from Jakarta, the shift reflects a broader push to modernise welfare distribution, leveraging technology to ensure aid reaches those most in need while minimising leakage. The government has emphasised that the cash transfer model will consolidate various subsidy schemes into a single, streamlined payment.

However, the plan has faced questions from opposition lawmakers. Andreas Hugo Pareira of the Indonesian Democratic Party of Struggle (PDIP) has challenged the government on the source of funding and the criteria for beneficiaries, noting that Rp5.4 million per person is a substantial sum relative to the state budget. From a fiscal perspective, analysts in Jakarta point out that such a programme would require significant reallocation of resources, potentially straining the APBN if not accompanied by corresponding cuts or revenue increases.

The debate underscores the delicate balance between expanding social safety nets and maintaining fiscal discipline. As the government moves forward with digital integration, the success of the cash transfer scheme will depend on robust data systems to verify eligibility and prevent fraud. Observers note that while the reform promises greater efficiency, its implementation will be closely watched for its impact on inflation, consumption, and the broader economy. The coming months will reveal whether the administration can secure the necessary legislative support and public confidence to execute this ambitious transformation.