Gov’t to Use Multi-Year Budgeting for its Capital Expenditure: Finance Minister
Date 15 April 2020
The Government will change funding mechanism for its capital expenditure from single year to multi-year funding, especially in budget allocation at the Ministry of Public Works and Public Housing, the Ministry of Transportation, and other Ministries that need large capital expenditures.
“The measure is expected to provide fiscal space of Rp59 trillion. It does not mean that the projects stall. The projects will be delayed so we can overcome the pressure for this year’s State Budget,” Minister of Finance Sri Mulyani Indrawati said in a press conference after a Plenary Cabinet Session on Tuesday (14/4).
Regarding the reallocation of the 2020 budget, Sri said that the State Budget will face tremendous pressure this year and President Joko “Jokowi” Widodo has instructed that priorities for this year’s budget allocation are health sector, social safety net, and assistance or protection for informal sectors, small and medium businesses, and the business sector in general.
“The measures aim to prevent the shifting from health problems to social problems, economic problems and even financial system problems. We try to prevent the domino effect through extraordinary measures this year,” the Minister added.
For additional expenditure, the Minister explained that Rp75 trillion will be added for health sector, including incentives for health workers, patients medical treatment and upgrading hospitals. For social assistance, Rp110 trillion will be added, while Rp70 trillion will be added for industry support. There is also financial support which is called the economic recovery program with Rp150 trillion insurance bonds that will change the structure of the 2020 State Budget.
“In order to maintain the deficit, the President has issued Presidential Regulation Number 54 of 2020 that provide guidelines for all Government Ministries/Institutions and Regional Governments for adjusting or reducing the expenditures this year.” the Minister said.
Sri went on to say that Government goods expenditures in Government Ministries/Institutions and Regional Governments will be reduced by Rp8 trillion from the previous Rp46.7 trillion budget allocation. He added that goods expenditure which is not included in the national priority will be reduced by Rp41 trillion from the previous Rp173.8 trillion budget allocation. The Government will also review Rp145.7 trillion of capital expenditures.
“The President has approved the measures to reduce expenditure in Government Ministries/Institutions. The measures have been stipulated in Presidential Regulation Number 54 and there will be further measures to ensure that all of us, Government Ministries/Institutions and Regional Governments work together to overcome the COVID-19 problems,” she said.
The Minister of Finance also said that the President has instructed the Ministry of Home Affairs and the Ministry of Finance to provide directions to Regional Governments in making their budget adjustments.
“We have explained that the reduction in regional spending can reach up to Rp383.4 trillion, which must be used to create flexibility in dealing with COVID-19. So this reduction is not for saving but it should be allocated for handling the COVID-19,” Sri said.
Sri further said that Regional Budget will also be affected due the possibility of a decline in local revenue and also a decrease in the transfer of funds to the regions amidst the COVID-19 outbreak.
The Minister called on Regional Governments to adjust employee expenditure, goods and services expenditure, and capital expenditure. The Regional Governments, she added, should prioritize the COVID-19 handling and health sector, social assistance, as well as the business sector, especially small and medium businesses.
“We hope that the Central Government and Regional Governments are able to focus on handling the COVID-19 problems in health sector, helping communities by providing social assistance, and helping the business sector, including informal sector, MSMEs and corporate sectors,” the Minister said. (TGH/FID/EN)
Translated by: Ridwan Ibadurrohman
Reviewed by: Mia Medyana