Ministry of Finance Sri Mulyani Indrawati and his staff at the Parliament Meeting - Photo by Finance Ministry

JAKARTA (TheInsiderStories) – Indonesia’ finance ministry Sry Mulyani Indrawati on Tuesday (07/16) reported a deficit of the state budget in the first half (1H) of 2019 reached Rp135.8 trillion (US$9.7 million). The deficit is equivalent to 0.84 percent of gross domestic product (GDP). The realization of the budget deficit is higher than the budget deficit of the same period in 2018 amounting to Rp 110.6 trillion or 0.75 percent of GDP.

The ministry noted total state revenues and grants as of the end of June reached Rp898.8 trillion. Realization of the state income is equivalent to 41.5 percent of the revenue target in the overall state budget of Rp2,165.11 trillion. The country’s income only grew 7.8 percent year on year (YoY), lower than 1H-2018 which grew 16 percent.

The main supporter, tax revenues reached Rp688.9 trillion or 38.6 percent of the state budget. Tax revenues rose 5.4 percent (YoY). Indrawati explained revenues from the non-oil and gas sector continued to grow positively amid pressure from the weakening global economy. Then, non-tax state revenues were recorded at Rp 209.1 trillion or 55.3 percent of the target, growing by 18.2 percent (YoY).

Meanwhile, state spending as of June 2019 grew 9.6 percent or reached Rp1,034.5 trillion. The expenditure realization fulfilled 42 percent of the 2019 state budget ceiling of Rp2,461.1 trillion.

Until the end of 1H-2019, the primary balance recorded a deficit of Rp1 trillion. In the same period last year, the primary balance surplus was Rp10 trillion. The last positive primary balance occurred in 2011.

After that, the primary balance continued to be a deficit until it broke through Rp142.4 trillion in 2015. However, last year, the primary balance deficit dropped to only Rp1.8 trillion. The primary balance deficit in 1H of 2019 was only one-tenth of the realization in the same period last year which amounted to Rp10 trillion. However, this achievement does not seem to necessarily mean that this year’s deficit will be smaller than last year.

The government is targeting a primary balance deficit of IDR 20.1 trillion this year. However, based on the latest projections, the primary balance deficit is estimated to be greater at Rp34.7 trillion.

Meanwhile, budget financing reached Rp175.3 trillion or reached 59.2 percent of the ceiling amounting to Rp296 trillion. Budget financing contracted 0.5 percent compared to the same period last year.

Thus, the budget deficit per June 2019 is Rp135.8 trillion or 0.84 percent of GDP. Meanwhile, the government’s target this year is the deficit to GDP ratio of 1.84 percent or smaller than the previous year’s deficit target of 2.19 percent of GDP.

Indrawati said that the performance of the 2019 state budget was influenced by domestic and external global sentiments. Escalation of trade wars depressed global economic growth and affected the performance of Indonesia’s exports and imports.

“The realization of oil prices and oil and gas lifting which is lower than the assumption in the first semester also has consequences on state revenues,” said Indrawati in his report at the parliament budget agency.

The minister explained fiscal policy throughout the 1H of this year was able to overcome various economic uncertainties that occurred. Although did not dismiss the pressure on state revenues, Indrawati said the fiscal conditions were supported by countercyclical spending policies that effectively supported domestic economic growth.

“Global uncertainty and depressed world economic conditions will haunt us, but our economic performance is maintained positively,” she ended.

US$1=Rp14.000

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

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