Finance minister Sri Mulyani Indrawati said the 2020 State Budget deficit could widens to 6.27 percent of gross domestic product (GDP) followed the development of COVID-19 pandemic in Indonesia - Photo by Ministry of Finance Office

JAKARTA (TheInsiderStories) – Finance minister Sri Mulyani Indrawati said the 2020 State Budget deficit could widens to 6.27 percent of gross domestic product (GDP) followed the development of COVID-19 pandemic in Indonesia. Recently, she said the deficit 5.07 percent of GDP with values Rp852.90 trillion.

She explained, the revised budget shortfall is estiamting Rp1,028.5 trillion (US$$68.57 billion) caused the government now set aside a total of Rp641.7 trillion for emergency response to the epidemic. The widening deficit was caused the projected of state revenue will contracted 13.6 percent from the initial targets Rp1,760.9 trillion to only Rp1,691.6 trillion amid the various tax incentives.

Based the finance ministry calculation, the total tax incentives provided will reach Rp123.01 trillion, consisting of a reduction income tax, exemption of import tax, discount tax by 30 percent, and value added tax refunds will accelerated. She added, there are also additional income tax and other stimulus reserves amounting to Rp14 trillion and Rp26 trillion, respectively.

While, said Indrawati, government spending will increases from Rp2,613.8 trillion to Rp2,720.1 trillion. The government will provides additional compensation to two state-owned enterprises PT Perusahaan Listrik Negara (PLN) Rp38.25 trillion and PT Pertamina worth of Rp37.83 trillion.

With the addition funds, total compensation to PLN will raises to Rp45.42 trillion and PT Pertamina at Rp45 trillion. The government also provided additional fiscal stimulus including for small medium entreprises with total amount Rp34.2 trillion, electricity tariff discount for six months Rp3.5 trillion, additional social assistance until December 2020 Rp19.62 trillion, and stimulus reserves of Rp60 trillion.

On May 12, House of Representatives has approved the Government Regulation Lieu of Law Number 1 of 2020 concerning State Financial Policies and Financial System Stability for COVID-19 Handling become a law. With the approval, President Joko Widodo’ administration allows to set a deficit ceiling over than 3 percent of GDP and room for more spending and stimulus until 2022.

In addition, the government also allowed to spend Rp405.1 trillion to tackle the epidemic and its impact on the economy in this year. Indrawati emphasized, the decision give a strong legal basis for the government and related institutions to continue steps in order to overcome the threat of COVID-19 in the field of health, social threats, economic threats and financial system stability.

She said, that through the new bill, the government will distributes additional budget Rp75 trillion for health sector, including incentives for medical doctors, nurses, death benefits, purchasing medical devices (including Personal Protective Equipment), masks, hand sanitizers, ventilators, and hospital preparations and quarantine facilities.

The government also extended the provision of additional social assistance of Rp100 trillion to the people affected by COVID-19 who are in dire need. More than 29 million families or even above 50 percent of the people of Indonesia will enjoy the assistance in the form of cash, groceries, exemptions and discounts on electricity, to pre-work cards.

At the same day, House speaker, Puan Maharani, also announced the parliament has agreed to discusses the 2021 State Budget. Indrawati proposed a fiscal deficit between 3.21 to 4.17 percent for next year to support the economic recovery after the pandemic ends.

Indonesian government expect the economic growth could rebound in 2021 between 4.5 to 5.5 percent of GDP from this year could drops to 2.3 of GDP. The country has sliced more than half of the growth targets from initial targets 5.01 percent of the GDP. On March 31, the head of state has widened the 2020 State Budget deficit from 2.5 percent to 5.07 of GDP to curb the country’ economy from the impact of epidemic.

US$1: Rp15,000

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