Indonesia expects larger deficit and plans to issue more debt

JAKARTA (The Jakarta Post / Asia News Network): Government plans to issue more debt than expected last month as state budget revenue deficit is expected to worsen by the end of the year.

Finance Minister Sri Mulyani Indrawati told lawmakers on Monday August 23 that debt issuance for the whole of 2021 is now expected to reach Rs 1.02 quadrillion, compared to Rs 958.1 trillion expected on July 20.

The minister did not elaborate on the reasons for the upward revision, but pointed out that the figure was still lower than the 1.17 billion rupees indicated in the 2021 budget plan, with 150.4 billion rupees taken from the funds. unused annual government budgets.

“In difficult times, we try to manage the state budget and the issuance of debt prudently. We will use the leftovers to reduce our debt issuance this year, ”Sri Mulyani said at a meeting in the House of Representatives.

The government now expects a budget deficit of 961.5 trillion rupees, or the equivalent of 5.82 percent of GDP, against 939.6 trillion rupees, or 5.7 percent of GDP, projected on July 20.

Despite the higher deficit-to-GDP ratio, Sri Mulyani said the numerical figure was lower than shown in the state’s budget plan at 1 quadrillion rupees, or 5.7 percent of GDP.

“The percentage is higher due to a lower estimate of GDP growth. Although the numerical value is lower, the percentage is still increasing, ”Sri Mulyani said.

According to the ministry’s presentation documents, in line with the increasing deficit, the government also revised its projection of the shortfall in tax revenue from 53.3 trillion rupees forecast in July to 87.1 trillion rupees on Monday.

According to the new forecast, the ministry estimates that it will collect Rs 1.14 quadrillion in revenue, or about 92.9% of the 2021 budget target of Rs 1.22 quadrillion.

Sri Mulyani said the lower projection was mainly the result of various restrictions on public activities imposed in July and August.

“The effect of public mobility restrictions [implemented in response to] the Delta variant will be felt in the second half of this year. [Economic activity] in July and August will be hit hard by the Delta variant, which will be reflected in the collection of taxes, ”Sri Muylani said.

To offset this effect, she said, the government planned to increase revenues from other sources, namely non-tax revenue (PNBP) as well as international trade levies and fees.

Non-tax revenues were to amount to Rs 357,200 billion, while Rs 233.4 trillion would come from levies and duties.

Despite the expected increase in other income, the decline in tax collection is expected to lead to an overall decline in government revenue, with total revenue reaching 1.73 quadrillion rupees, or 99.5% of the target. That’s less than Rp 1.76 quadrillion or 101% of the target set last month.