The government is optimistic it will be able to meet 100 percent of the state revenue target in the 2018 state budget and lower the state budget deficit. In order to maintain market confidence, no revision will be made in the 2018 state budget.
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ANTARA FOTO/PUSPA PERWITASARI
Finance Minister Sri Mulyani Indrawati (second left) with National Development Planning Board head Bambang Brodjonegoro (second right), Bank Indonesia Governor Perry Warjiyo (left) and Deputy Minister of Finance Mardiasmo (right) attend a joint working meeting at the House of Representatives in Senayan, Jakarta, Wednesday (11/7/2018). The meeting discussed the 2019 state budget and the government’s work plans in 2019 with the submission and ratification of the working committee’s reports.
JAKARTA, KOMPAS – The government has decided not to revise the 2018 state budget, although a number of macro assumptions no longer reflect the real condition. The decision was made in order to ensure there are no major changes in budget disbursement.
The policy is part of the government’s effort to maintain market confidence.
As of May, state revenue in the 2018 state budget reached Rp 685.09 trillion, a 15.33 percent increase from the figure recorded in the same period last year, while budget disbursement amounted to Rp 779.51 trillion, a 7.28 percent increase.
Finance Minister Sri Mulyani Indrawati said the budget could be maintained despite changes in some macroeconomic assumptions. All spending programs will be carried out according to the plans stipulated in the current state budget, although the government will accommodate some additional spending, especially for the 2018 Asian Games and other urgent needs.
"Looking at the trend, and potential risks resulting from the changes in oil prices, exchange rates and interest rate hikes, we hope state revenues, by the end 2018, will reach 100 percent of the target," she said in Jakarta on Wednesday.
In the first half of 2019, the state budget deficit totaled Rp 110 trillion, lower than the Rp 175 trillion recorded in the same period last year. The government is optimistic that the 2018 state budget deficit will account for 2.12 percent of the gross domestic product (GDP) or lower than the 2.19 percent target.
According to Sri Mulyani, the decision not to revise the budget was part of an effort to maintain market confidence. The public and business players would be more confident about doing business in Indonesia because the government could manage the budget well, she added.
A number of macro assumptions in the state budget no longer reflect the real condition. The rupiah exchange rate estimate of Rp 13,400 per US dollar in the budget is now far below the current rupiah exchange rate, which according to the Jakarta Interbank Spot Dollar Rate, has already reached Rp 14,391 per US dollar.
Meanwhile, the assumption of the oil price of $48 dollars per barrel has also been far lower than the actual crude oil price, which is currently at around $75 per barrel.
Growth
The government’s decision to not revise the state budget has been met with criticism.
Eko Listiyanto, the deputy director of the Institute for Development of Economics and Finance (INDEF), said the decision not to revise the state budget would affect economic growth.
In the first quarter of 2018, economic growth of 5.1 percent was mainly supported by rising commodity prices in global markets. "The decision could, instead, increase economic uncertainties, which could further weaken the economic growth," Eko said. This year, the government set an economic growth target of 5.4 percent.
Eko said that market confidence should be maintained and that the government must consistently reduce poverty, unemployment and inequality in order to improve confidence in the economy. By doing so, there could be a boost to economic growth.
The head of the Center for Economic and Public Policy Studies at Gadjah Mada University, Yogyakarta, A. Tony Prasetiantono, said the government\'s decision not to revise the state budget was made solely to maintain stability. If the 2018 state budget is revised, especially regarding the price of oil, the government might raise gas prices.
To anticipate the risk of an economic slowdown, Tony suggested that the government enlarge the deficit in the budget. The deficit, which was originally targeted at 2.19 percent of the GDP, could be widened to between 2.4 and 2.5 percent of the GDP.
The executive director of the Center for Reform on Economics Indonesia, Mohammad Faisal, said the policy not to revise the budget would benefit the government. State revenue from taxes and non-taxes would, for example, exceed the target. However, there would be doubts over the credibility of the state budget as the situation would not reflect actual macroeconomic conditions.
2019 state budget
The government will soon finalize the drafting of the 2019 draft state budget.
Proposals on macroeconomic assumptions raised during recent plenary discussions between the House of Representatives budget committee (Banggar) and the government would be good input for the drafting of the 2019 state budget, Finance Minister Sri Mulyani said during a working meeting with the House’s budget committee Wednesday. The meeting was also attended by National Development Planning Board (Bappenas) head Bambang Brodjonegoro and Bank Indonesia Governor Perry Warjiyo. The meeting was chaired by the chairman of the House’s budget committee, Aziz Syamsuddin, who also acts as a coordinator of the working committee.
During the meeting, it was agreed that the economic growth estimate in the 2018 state budget was set at 5.2 to 5.6 percent, inflation at 2.5 to 4.5 percent, the rupiah exchange rate at Rp 13,700 to Rp 14,000 per US dollar and the price of crude oil at $60 to 70 per barrel.
Bambang said the government would pay serious attention to proposals from House members. Infrastructure development should cover many aspects, such as education, health, connectivity and agriculture.
After the meeting, Perry said, the central bank’s policy was to maintain the stability of the exchange rate. He said the rupiah was still under pressure as a result of external factors.
