Indonesia Prepares Fiscal Buffer US$714M to Quell Budget Deficit in 2020

Askolani, director-general of budgeting at the finance ministry - Photo: TheInsiderStories

JAKARTA (TheInsiderStories) – Indonesia prepared Rp10 trillion (US$709.22 million) as a buffer for fiscal risks to overcome the budget deficit in 2020, the official said today (09/26). The amount rising 43 percent from this year’ allocation worth of Rp8 trillion.

Askolani, director-general at the finance ministry said the buffer can be used in any of the government’ macroeconomic assumptions misses forecasts, affecting revenue collection or ballooning subsidies.

“If the deficit rises, we can use it to make sure it stays below 3 percent,” he adds.

The buffer is also allocated considering the challenges of projected tax revenues will be increasingly challenging next year.

As of August 2019, the tax revenues only reached Rp801.16 trillion or 50.78 percent of this year’ target Rp1,577.56 trillion. By this, tax revenues only rose 0.21 percent compared with the previous year.

Askolani said the buffer could also be used if there is a change in government policy or for emergency responses for disasters. For 2020, the government is preparing a disaster mitigation fund of up to Rp5 trillion.

The disaster mitigation fund, he said, will be distributed to three institutions such as the Meteorology, Climatology and Geophysics Agency, the Agency for Assessment and Application of Technology, and the Geospatial Information Agency.

Parliament passed the government’s 2020 budget of Rp2.52 trillion earlier on Tuesday with a fiscal deficit 1.8 percent of gross domestic product, which officials have said was designed to anticipate a global economic slowdown.

The budget is President Joko Widodo’ first for his second term and already contained allocations for programs he promised when running for re-election before a presidential vote in April.

Among approved assumptions for the budget are 5.3 percent economic growth, an annual average rupiah trading rate of 14,400 a dollar and a $63 per barrel annual average price for Indonesian crude oil.

Askolani said 2020 allocations for infrastructure investment was Rp423.3 trillion, up only 2 percent from this year’ allocation Rp415 trillion. This includes an Rp3.5 trillion capital injection to state construction firm PT Hutama Karya and an Rp5 trillion injection to state power utility PT Perusahaan Listrik Negara.

Total allotted funds for 2020 social programs, which could support domestic consumption, was Rp372.5 trillion. President Widodo’ program to hand out cards to 2 million young people to obtain free skills training received an Rp10 trillion budget, he ended.

US$1=Rp14,100

Written by Lexy Nantu, Email: lexy@theinsiderstories.com