Indonesia Trims Deficit Assumption in Revised State Budget This Year

Jakarta, 15 Ramadan 1437/21 June 2016 (MINA) – Indonesian government trimmed down its deficit assumption in the revised state budget this year to 2.35 percent from the initial rate set at 2.48 percent from national Gross Domestic Product (GDP) on the back of potential revenue addition from oil and gas sector, a senior official said here on Monday.

Speaking after a meeting with legislators of budgeting commission at the parliament, Head of Fiscal Policy Section at the Financial Ministry Suahasil Nazara said that the deficit reduction plan has been approved by the parliament.

“Deficit rate must be reduced so as to make government more credible. Government must stay focusing its efforts to address urgent needs and priority needs,” Xinhua reported, quoting Suahasil.

The approval on deficit assumption was gained to accommodate input conveyed by a legislator who said that the newly-approved Indonesian Crude Price (ICP) at 40 U.S. Dollars per barrel has the potentiality to add government’s revenue in oil and gas sector, adding that that it can minimize the deficit assumption in the state budget.

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The proposal to alter the ICP assumption in the revised state budget this year to 40 U.S. Dollars per barrel was issued by the Energy and Mineral Resources ministry (ESDM) who learned that the average ICP rate from January to May stood at 34.50 U.S. Dollars per barrel. The proposal was approved by the parliament recently.

That level was below the state budget assumption this year initially set at 50 U.S. Dollars per barrel.

In its latest economy outlook report, the World Bank estimated that Indonesia’s budget deficit rate may expand to 2.8 percent from GDP throughout this year, or higher than 2.6 percent recorded last year.

The deficit increase was due to the increasing of central government’s spending up to 90 percent from budget allocation coupled with unperformed tax revenue target this year.

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The central bank estimated that Indonesian central government’s spending growth would grow 14.9 percent from the GDP this year, while at the same time its revenue would only grow at 12.1 percent. (T/R07/R01)

Mi’raj Islamic News Agency (MINA)

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