Indonesian government considered to slice the state bond issuances in this year due to excess financing during 2020 - Photo by Finance Ministry Office

JAKARTA (TheInsiderStories) – Indonesian government considered to slice the state bond issuances in this year due to excess cash from 2020 State Budget, said the director general at the finance ministry office. According to the government data, there are excess budget financing more than Rp100 trillion (US$7.09 billion).

Director general of financing and risk management at the ministry, Luky Alfirman, said virtually on Monday (02/23), initially the government targeting the net issuances of the state bond around Rp1,177.4 trillion in this year. The excess cash came from the burden sharing policy with Bank Indonesia.

Indonesia need funds from the bond market to finance the 2021 State Budget deficit around 5.7 percent of gross domestic products (GDP). At the press conference, finance minister, Sri Mulyani Indrawati, also reported the realization budget financing at the end of January amounted to Rp165.9 trillion or 16.5 percent of this year’ target.

The financing came from excess cash, soft loan, investment financing, and other sources of funding. The financing adjustment is expected to reduce pressure on the government bond market and control the costs, she adds. At the beginning of 2020, the ministry has succeeded published US Dollar and Euro-denominated bond with total valued $4.2 billion with 10 years, 30, and 50 years of tenure.

In this week, the ministry also has released retail bond with Series ORI019 with worth of Rp26 trillion. All proceeds from the debt issuance are used to meet the 2021 State Budget financing needs, including for the COVID-19 pandemic response and national economic recovery program.

Indrawati also reported, the state revenue reached Rp100 trillion or dropped by 4.8 percent compared to the same period of 2020 and total spending grew by 4.2 percent to Rp145.8 trillion. In detailed, central government spending jumped 32.4 percent to Rp94.7 trillion and the rest was contributed by transfers to the regions and village funds.

At the end, she asserted, the budget deficit is under control at 0.26 percent of GDP. President Joko Widodo administration has widened the budget deficit 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. The policy that exceeds 3 percent of GDP in 2021, he adds, is still maintaining by fiscal prudence, credibility, and sustainability.

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 this year, 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.

The budget 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.

US$1: Rp14,100

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