The recent ratification on revision to the Law No. 34/2004 on the Indonesian MIlitary (TNI), in particular on the extension of soldiers’ retirement age, will have an impact on both the State budget (APBN) and internal affairs within the military institution, Economic and military experts say.

Under the revised Law, non-commissioned officers and privates retire at the age of 55 from the previous 53 yearsof age. Middle-ranking officers to colonels retire at the age of 58, while high-ranking officers from one- to three-star generals retire at the ages of 61, 62, and 63 respectively.

Meanwhile, four-star generals can have their retirement period extended up to two times by the President.

Galau D. Muhammad, a researcher at the Center of Economic and Law Studies (CELIOS), said that this policy raises a number of potential problems, especially related to the country's fiscal fundamentals which are already very vulnerable.

"We have quite a large debt arrears, around Rp800 trillion (US$53.3 billion), plus a decrease in State revenue of around Rp31 trillion (US$2 billion) due to obstacles in the tax bureaucracy," Galau spoke to Indonesia Business Post on Friday, March 21, 2025.

He reminded that Indonesia is currently experiencing a significant fiscal deficit, which is forcing the state to finance the increase in spending through debt.

"If the active service period of TNI soldiers is extended, then financing the salaries and allowances of TNI soldiers will further burden the budget, which is currently at a critical point," Galau noted.

According to data at the Defense Commission I of the House of Representatives (DPR), the number of active TNI soldiers is recorded at 457,000 people, with more than a thousand of them holding the rank of general(One-star to Four-star general).

Commission I considers that the budget allocation for soldiers can still be met by the State fiscal despite the increased soldiers’ age of retirement.

Critics, however, lash out at this argument. CELIOS said that the House’s projection did not take into account the increasingly fragile fiscal conditions.

Furthermore, CELIOS reminded that state employee spending in 2024 has reached Rp265 trillion (US$17,67 billion) with almost 92 percent of the budget allocated for salaries and allowances.

"If the soldiers’ active service period is extended, the impact on fiscal stability and budget politics will be very significant, especially with the potential for an increase in the budget allocated for TNI allowances and salaries," Galau said.

The Ministry of Defense's budget for 2024 was recorded at Rp139,26 trillion (US$9.27 billion), which already covers various operational needs and allowances for soldiers. The increased soldiers’ active period of service will certainly affect the distribution of the existing budget in the future.

Critics also dismissed the argument provided by the government that the extended period of service is meant to award TNI soldiers who have contributed greatly to maintaining national stability.

In fact, they said, this extended retirement age will not have a significant impact on soldier productivity, considering that a longer retirement age is not always in line with an increase in the quality of soldiers.

Military regeneration

Former Governor of the National Resilience Institute (Lemhannas), Lieutenant General (ret.) Agus Widjojo, has warned that this change could damage the pyramid structure in the TNI organization.

"The pyramid must be maintained, not sacrificed," Agus said on March 18, 2025.

The pyramid structure in the military refers to the number of personnel at lower levels, which are greater than officers at higher levels. According to Agus, this system maintains healthy competition in the military institution.

He considered that the promotion system in the TNI would also change drastically because the regular promotion cycle every April 1 and October 1 would most likely no longer be used.

"Promotions will be determined by the TNI leadership. This is like playing a game at a night bazaar, you can go up or down at will," Agus said.

Military analyst Andi Widjajanto said that this change will have a major impact on the number of high-ranking officers who do not have positions.

With Law No.34/2004 alone, there are around 100 high-ranking officers who are non-job. After the new regulation comes into effect, the number is predicted to increase drastically.

"Around 300 officers will be non-job," Andi, who is also a Former Lemhannas Governor, said as quoted in aRhenald Kasali's podcast, broadcast on Wednesday, March 19, 2025.

Indonesia Strategic and Defense Studies (ISDS) estimated that at the end of 2023 there were around 130 high-ranking officers who were unemployed and there were 300 colonels that had no formal positions.

Dwi Sasongko, Co-Founder of ISDS, assessed that this phenomenon will continue to occur in the next few years due to the accumulation of the number of middle and high-ranking officers due to the extension of the retirement period.

Changes in the promotion and regeneration system within the TNI have raised concerns about the effectiveness and dynamics of leadership in the military environment.

The government and TNI are expected to find a solution so that the extension of the service period does not have an impact on the stagnation of soldiers' careers and maintains balance within the military organization.

Dwi said that although the government and the Househave agreed on the extension of the retirement age, they still need to ensure that the policy will not disrupt the stability of the State's finances. Further analysis is needed to measure the impact of this policy on the economy and state finances in the long term, he suggested.

Finance Minister Sri Mulyani has confirmed that the fiscal impact of this change has been calculated, but further details regarding the additional budget have not yet been published.

"It's all been calculated," Sri Mulyani said at the Merdeka Palace in Jakarta on Friday, March 21, 2025.

She, however, did not explain further on the amount of the additional budget as a result of the increased TNI soldiers retirement age.