(Bloomberg) -- Indonesia’s Defense Minister Prabowo Subianto, who has claimed victory in last month’s presidential election, signaled that he will uphold fiscal prudence and maintain a steady hand on the economy once he’s in the driver’s seat.

Prabowo, in a speech Tuesday at the Mandiri Investment Forum, said he is targeting economic growth of 8% in the next five years, while keeping focus on expanding the tax base and maintaining fiscal discipline. He said he will push for a tax revenue target of about 14%-16% of gross domestic product by ensuring wider compliance without necessarily resorting to more levies.

“Our trade balance has been positive for the last five years. Our reserves are very healthy although it must be better in coming years,” Prabowo told the audience, comprising ambassadors and the business community. “We are determined to maintain this trajectory of prudent and wise management.”

Prabowo is most likely to become Indonesia’s next president after securing close to 60% of the votes based on quick counts, though official declaration will be made by the election commission by March 20. Preserving fiscal discipline — Indonesia has a legally mandated cap on the budget deficit at 3% of gross domestic product — and seeing through reforms will ensure policy continuity and help strengthen the credit profile of the nation, whose BBB rating at Fitch Ratings is currently one notch above India’s score.

The speech Tuesday was the Indonesian leader’s first at a public event since declaring victory after the Feb. 14 election. His remarks can be seen as an attempt to allay investor concern over his policy plans while giving a glimpse of what’s to come under his administration.

Costly Pledges

Concerns have been swirling that Prabowo’s vast spending plans could burden the country’s budget. His spending spree could amount to 460 trillion rupiah ($29 billion), more than the entire 2023 budget deficit. He signaled his focus on improving health and education outcomes with a plan to give out free school lunches and milk to more than 80 million children, which he also expects to create employment for women and small businesses.

However, there are reports that Prabowo’s ambitious spending plans have created some tension within the cabinet, especially with Finance Minister Sri Mulyani Indrawati. In a speech at the same event, she said that Indonesia must not rely on the state budget to boost demand, adding that the government must raise the “quality” and not just the size of its outlay.

When asked about the political transition this year, Indrawati said: “It is our responsibility to make sure that we are going to provide a legacy of the budget that is healthy, strong and credible enough so that any new elected government will be able to continue achieving their development goals or political promises that are already announced.”

Indonesian bonds fell as investors remain jittery over the prospect of a looser fiscal stance. The yield on five-year bonds rose three basis points to 6.53%, the biggest gain in a month, while benchmark 10-year yields rose two basis points to 6.65%, the highest since Feb. 12.

“It makes sense that IndoGB yields reprice slightly higher to account for the risks of wider deficit and larger funding requirement,” said Winson Phoon, head of fixed income research at Malayan Banking Bhd in Singapore.

‘Messy’ Democracy

On top of that, democracy activists worry that Prabowo’s ascension as leader could mark the return of authoritarianism, since the former military general who was discharged from service has been accused of human rights abuses under the dictatorship of former leader Suharto.

In an attempt to dispel such concern, Prabowo lauded the importance of democracy at the speech on Tuesday. Indonesia’s democracy, he said, is functioning and shouldn’t be seen as inferior to that in other countries.

“Let me testify that democracy is very, very tiring. Democracy is very, very messy. Democracy is very, very costly and we are still not satisfied with our democracy. There is a lot of room for improvement,” he said, without elaborating how. 

Current President Joko Widodo, who is serving his second and final term, will step down in October. Prabowo has pledged a smooth transition, continuing his predecessor’s existing policies and making them even more efficient. One way could be by rationalizing and privatizing some unnecessary state-owned enterprises, he said.

Prabowo likewise told investors in the forum that his government would collaborate with the financial sector, be creative in tackling inflation, and do more to reduce poverty and improve food self-sufficiency.

--With assistance from Claire Jiao, Norman Harsono, Fathiya Dahrul and Matthew Burgess.

(Updates with comments from finance minister in the seventh paragraph and bond yields in the ninth.)

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