News ID: 261780
Published: 0914 GMT November 19, 2019

Indonesia fiscal deficit to soar amid sluggish tax collection

Indonesia fiscal deficit to soar amid sluggish tax collection
Deputy Finance Minister Suahasil Nazara ( FAUZI)

Indonesian government has indicated that the 2019 fiscal deficit could hit its worst-case estimate as it plans to keep spending despite sluggish revenue collection.

Deputy Finance Minister Suahasil Nazara said the government was now projecting a fiscal deficit of 2.2 percent to the gross domestic product (GDP) this year, hitting the upper limit of its deficit estimate of between two percent and 2.2 percent, The Jakarta Post reported.

The figure compares with a budget-deficit-to-GDP ratio of 1.84 percent anticipated in the 2019 state budget plan, equal to Rp 296 trillion.

Suahasil said the wider deficit reflected the government’s desire to implement planned programs amid weak revenue growth.

“We can see that the revenue target may not be reached, but spending needs to [continue as planned] to achieve [program] targets,” said Suahasil in Jakarta. “We want efficient financing, but spending will continue in order to [maintain] economic growth momentum.”

As of October, the fiscal deficit has reached 1.8 percent of the GDP, or Rp 289.06 trillion. Overall state revenue — which includes tax revenue, non-tax revenue, as well as grants — reached Rp 1.5 quadrillion in October, nearly 70 percent of the state revenue target. Total spending stood at Rp 1.79 quadrillion as of October.

Tax revenue reached 65 percent of the target as of October, amounting to Rp 1.01 quadrillion ($72.36 billion).

In boosting state revenue, the government would remain ‘opportunistic’ in seeking sources of financing, looking for the best timing, price and market conditions before entering the bond market with new bond issuance, Suahasil said.

The government is scheduled to hold auctions for its debt papers, while it will also hold two auctions for sharia sovereign bonds (SBSN), namley on Nov. 26 and Dec.10, according to the website of the Finance Ministry’s Directorate General of Financing and Risk Management.

Suahasil said the government would continue to monitor the latest developments in the global and domestic economy to determine whether it would need additional financing next year. The government aims for a fiscal deficit of 1.76 percent to the GDP, or Rp 307.2 trillion, in 2020.

“We will look at next year’s economic conditions. If the economy is good, we might be able to implement the state budget smoothly,” said Suahasil. “But if [economic conditions] are rather difficult, we must make some adjustments.”

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