Finance Minister Stipulates Maximum Limit of Regional Budget Deficit and Regional Loan for 2020 Fiscal Year
In a bid to implement provisions of Article 5 of Government Regulation Number 56 of 2018, and Article 6 paragraph (2) as well as Article 7 of Government Regulation Number 12 of 2019, Minister of Finance Sri Mulyani Indrawati has signed Regulation of Finance Minister (PMK) Number 125/PMK.07/2019 on Maximum Limit of Cumulative Deficit of Regional Budget (APBD), Maximum Limit of Deficit of APBD, and Maximum Limit of Cumulative Regional Loan for Fiscal Year 2020.
“Maximum Limit of Cumulative Deficit of APBD for Fiscal Year 2020 is set at 0.28 percent of the total Gross Domestic Product (GDP) projected in the Fiscal Year 2020,” Article 2 of the Minister Regulation reads.
The projected GDP as intended is a projection used to formulate the 2020 State Budget (APBN).
According to the Regulation, Maximum Limit of Deficit of APBD for Fiscal Year 2020 is divided into several categories based on Regional Fiscal Capacity, among others:
- 5 percent of the total regional income projected in the Fiscal Year 2020 for regions with ‘very high’ category;
- 25 percent of the total regional income projected in the Fiscal Year 2020 for regions with ‘high’ category;
- 4 percent of the total regional income projected in the Fiscal Year 2020 for regions with ‘moderate’ category;
- 75 percent of the total regional income projected in the Fiscal Year 2020 for regions with ‘low’ category;
- 5 percent of the total regional income projected in the Fiscal Year 2020 for regions with ‘very low’ category.
“Maximum Limit of Deficit of APBD in each region will be used by regional governments as guidelines to stipulate the 2020 APBD,” Article 4 reads.
The Finance Minister Regulation also regulates Maximum Limit of Cumulative Regional Loan for Fiscal Year 2020 which is at 0.28 percent of the total GDP projected in the Fiscal Year 2020.
Based on this PMK, the regional loan includes the one that is used to fund the expenditures.
In cases when the Deficit of APBD is projected to be larger than the limit, it can be applied under approval from the Minister of Finance through the Ministry’s Director General of Fiscal Balance.
“Approval or disapproval for Maximum Limit of Deficit of APBD will serve as a consideration for Minister of Home Affairs or Governors in evaluating the bill of regional regulation on the APBD,” Article 9 states.
Minister of Finance through Director General of Fiscal Balance shall monitor the regional governments which draw up budget of regional loan to cover the APBD deficit and expenditures.
“This Minister Regulation shall apply as of the date of its promulgation,” Article 14 of Regulation of Finance Minister (PMK) Number 125/PMK.07/2019 which is stipulated by Director General of Law and Regulation, Ministry of Law and Human Rights, Widodo Ekatjahjana on 30 August 2019 reads. (JDIH Kemenkeu/ES)
Translated by : Rany Anjany Subachrum
Edited by : Mia Medyana Bonaedy
