Preparing for the Worst

KOMPAS/HERU SRI KUMORO

President Joko Widodo announcement of the first two confirmed Covid-19 cases at Veranda Merdeka Palace, Jakarta, Monday (3/2/2020). These two people were infected from Japanese citizens who met them in Depok, West Java.

The Covid-19 pandemic demands handling on multiple lines at once: health, economy and finance with a quick and precise response.

Approximately 53 days have passed since Indonesia announced the first case of Covid-19. The government\'s response has evolved in line with the increase in understanding about Covid-19. The pandemic has caused health, social, economic and financial shocks.

From an economic viewpoint, large-scale social restrictions (PSBB) to terminate Covid-19 transmission requires that almost all people not interact in public spaces. The implementation of the PSBB caused economic activities to stop in almost all sectors. Those that have immediately felt the impact are the tourism industry, the MSME sector, up to the service sector related to hospitality. Many industries lay off permanent employees, terminate employment, and release contract employees. Unemployment increases and the number of poor people rise.

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The government is responding to the rapid changes in the economy, as reflected in Regulation in lieu of Law No. 1/2020. This year\'s budget deficit has widened to 5.07 percent and a deficit above 3 percent will be carried out until 2022. The Financial Services Authority has loosened credit for debtors in banking and leasing. Bank Indonesia is taking a series of steps to relax the statutory reserve requirement for banks to help with capital.

In a virtual meeting with the mass media on Thursday (23/4/2020) evening, the finance minister explained, among others, discussed the reallocation and refocusing of central and regional budgets. Transfers to the regions and village funds have been diverted for Covid-19 handling, and there have been adjustments to the transfers to the regions, including the use of the Regional Budget (APBD). Non-urgent expenditure for goods, services and capital has been cut in half to be diverted to the handling of Covid-19, including helping the poor and the middle class group at the bottom of the pyramid. They are vulnerable to poverty.

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KOMPAS/PRIYOMBODO

Finance Minister Sri Mulyani Indrawati

Certainly the state revenue decreases, while spending increases. We have never experienced a national disaster at the magnitude of Covid-19 in the history of Indonesia, where the budget for disasters was not as large as what is needed today.

We cannot measure for sure the socio-economic impact of Covid-19. How deep the impact will be depends on how big and how long the Covid-19 handling is.

For now, we want the government to continuously monitor, anticipate and prepare the response for the Covid-19 impact, including increasing the Covid-19 impact mitigation budget if the Rp 150 trillion funds currently prepared are not sufficient to restore the national economy.

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We do not want aid for business actors to be misused. On the other hand, we want the government and financial authorities to facilitate the revival of the micro-business world to a large extent so that our economy recovers quickly following the V curve once the pandemic can be overcome.