Indonesian government expanding the budget deficit to 2.2 percent to gross domestic products (GDP) followed the potential short fall on tax revenues around Rp200 trillion (US$14.29 billion) - Photo by Finance Ministry Office

JAKARTA (TheInsiderStories) – Indonesian government expanding the budget deficit to 2.2 percent to gross domestic products (GDP) followed the potential short fall on tax revenues around Rp200 trillion (US$14.29 billion). Initially, in the 2019 State Budget, the country targeting the budget deficit 1.84 percent of GDP.

Based on 2019 State Budget data, the government targeting to raise tax revenues Rp1,557.50 trillion. But, until October the realization of the tax revenues recorded around Rp1,000 trillion.

As reported by local media, deputy finance minister, Suahasil Nazara blamed the uncertain global economic conditions as the reasoned the tax revenues lower that this year target. To finance the deficit, he continued, the government will release more government bond to the market. In addition, the ministry also implemented budget efficiency.

He stated, “This needs to be done because we want our economic growth to remain at a minimum level at 5 percent.”

The ministry reported the realization of state revenues until Dec. 10, recorded Rp1,167.35 trillion or 74 percent of this year’ target. While, the government spending worth of Rp1,798 trillion or 73.1 percent of the budget. Then, the realization of budget financing has reached Rp373.4 trillion or 126.4 percent of the budget ceiling.

Director general of tax Suryo Utomo rated, there were three factors that caused the realization of tax revenue in 2019 not reach the target like tax refunds, the global economy condition that affected the exports and imports businesses, and commodity prices.

Previously, finance minister Sri Mulyani Indrawati has sent a signal the government planned to widen the budget deficit. To implement the program, she was released the ministerial decree.

“I have issued a ministerial decree to widen the deficit and need more financing. (The amount) is not too large, we will continue to combine with a combination of domestic and international,” said the minister on Oct. 24.

Based on the government data, in this year the economic growth being targeted at 5.3 percent, inflation at 3.5 percent, Rupiah at 14,400 against the US dollar, and the rate of treasury bills at 5.3 percent.

Admitting that there is potential negative impact from the government’ import policies, she pointed out that the government will manage the imports in such a way not to negatively impact economic growth while minimizing impact to the increase of current account deficit.

The finance minister also said that the government will also try to find the best way of anticipating the change of consumption preferability among the public who tend to save their funds rather than investing to the real sector.

“Other than we’ll keep anticipating the potential global pressures, from the US Federal Reserve and current trade wars between the US and China and other countries,” she said.

Other macroeconomic assumptions approved during the hearing are the unemployment rate which is set at 4.8-5.2 percent, poverty rate at 8.5-9.5 percent, economic inequality at 0.38-0.39 percent, and Human Development Index at 71.98.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com