Indonesia set the 2021 State Budget Deficit 5.5% of GDP

President Joko Widodo projected the 2021 State Budget deficit around 5.5 percent of gross domestic products (GDP) or Rp971.2 trillion (US$66.97 billion) to cover the impact of the COVID-19 in Indonesia - Photo by President Office

JAKARTA (TheInsiderStories) – President Joko Widodo projected the 2021 State Budget deficit around 5.5 percent of gross domestic products (GDP) or Rp971.2 trillion (US$66.97 billion) to cover the impact of the COVID-19 in Indonesia. The deficit widens then initial planned around 5.2 percent of GDP and lower than this year’ budget deficit about 6.34 percent of GDP or Rp1,039.2 trillion.

“The pandemic has become health and humanitarian crises in this century affecting all sectors of human lives. Starting from health issues, the impacts of the COVID-19 pandemic have spread to social, economic and even financial sectors. Many countries have rolled out extraordinary mitigation measures particularly through fiscal stimulus,” he told member of parliament today (08/14).

Widodo said, the widening of the deficit is carried out by taking into account the need for state spending to deal with health issues and to rebuild the economy amid the declining state income. The government prepared health budget Rp169.7 trillion or equivalent to 6.2 percent of the GDP, geared towards an increase in and equal distribution of supply as well as facilitation for the procurement of vaccine.

He continued, national economic recovery will be carried along with the reform in various sectors. The policy of deficit relaxation that exceeds 3 percent of GDP in 2021, he adds, is still necessary by still maintaining fiscal prudence, credibility, and sustainability.

Widodo revealed, the 2021 State Budget bill is drawn up to speeding up national economic recovery due to the COVID-19 and encouraging structural reform to increase productivity, innovation, and economic competitiveness. It also speeding up economic transformation towards digital era and capitalizing and anticipating demographic changes.

In 2021, the government set the macroeconomic assumptions as follows, the economic growth 4.5 to 5.5 percent, inflation at 3 percent, Indonesian Rupiah 14,600 against the US Dollar, 10-year government securities interest rate at 7.29 percent, Indonesian Crude Price US$45 per barrel, Oil and gas lifting is estimated to reach an equivalent of 705 thousand barrels and 1 million thousand barrels of oil per day, respectively.

Budget deficit of 2021 will be financed by making of secured financing sources that are prudently managed. The deficit financing, said Widodo, will be carried out through cooperation with monetary authority, while upholding the principles of fiscal discipline and monetary policy discipline as well as maintaining the integrity, credibility, and market trust of the government bond.

The Government is committed to maintaining fiscal sustainability to keep debt ratio within controlled limit and continues to increase efficiency of debt cost through market deepening, expansion of investor basis, improvement of market infrastructure of state bond, diversification, and issuance of regional bond or SUKUK.

Investment financing will be also carried out by the government in 2021 with a budget of Rp169.1 trillion. This financing is planned for education sector, empowering MSMEs and Ultra-Micro financing, and accelerating the development of facilities and infrastructure in transportation, housing, and energy security also promoting national export program.

“Our hope that the deliberation of the 2021 State Budget Bill will be carried out in a constructive manner to make Indonesia an advanced, sovereign, self-sufficient, and distinctive nation based on Pancasila and the 1945 Constitution,” he concluded.

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