Indonesia’s State Budget Still at Safe Level: Sri Mulyani

By Office of Assistant to Deputy Cabinet Secretary for State Documents & Translation
Date 23 Oktober 2018
Category: News
Minister of Finance Sri Mulyani Indrawati attends press conference on 4-year Report of Joko Widodo-Jusuf Kalla Government, at Auditorium of Building III, Ministry of State Secretariat, Jakarta, Tuesday (23/10) (Photo: AGUNG/PR)

Minister of Finance Sri Mulyani Indrawati attends press conference on 4-year Report of Joko Widodo-Jusuf Kalla Government, at Auditorium of Building III, Ministry of State Secretariat, Jakarta, Tuesday (23/10) (Photo: AGUNG/PR)

Indonesia’s foreign debt remains at a safe level, according to  Minister of Finance Sri Mulyani Indrawati.

According to her, the Government controls the debt by keeping the debt ratio within a safe limit in the range of 30% of the GDP.

“The debt has been used for productive sectors to support the development of infrastructure, education and health sector,” Sri said at a press conference on the ‘4-Year Report of the Joko Widodo-Jusuf Kalla Administration in Jakarta, Tuesday (23/10).

The additional debt for the period of 2012-2014 and the first half of 2015-2017 period, she added, was Rp799.8 trillion, while in the previous period and second half of 2015-2017 period, it stood at Rp1.329 trillion.

But at the same time, Sri added, in the 2012-2014 period, infrastructure spending was only Rp466 trillion for 3 years, while today the infrastructure spending has reached Rp 904.6 trillion, or a two-fold increase.

As for spending on education, according to Sri, in the 2012-2014 period it was only Rp983 trillion for 3 years, compared to that of this year which at Rp1.167 trillion, or increasing by 118%. Health spending also also rose from Rp146 trillion to Rp249.8 trillion, up by 170%, she added.

The Minister added that spending to protect the poor is obvious through social protection programs, which was only Rp35 trillion in 2012-2014 and rose to Rp 299,6 trillion today, or almost 8 times higher.

Meanwhile, spending for regional development is: 25% for infrastructure, 20% for education and 10% for health, so spending on regional development overall has increased from Rp88 trillion to Rp315.9 trillion.

“So we need to do a thorough comparison, not only the additional debt, but also the expenditure,” the Minister said, adding that debt is only supplementary while the backbone of the country’s economy is still from tax revenue.

Sri Mulyani went on to say that the Government always keeps the risk of debt portfolio under control by committing to continue encourage efficiency of debt management, prioritizing prudent aspects and using debt productively to contribute optimally to the economy and people’s welfare.

In addition, Sri stated that during the administration of President Jokowi and Vice President Jusuf Kalla, the performance of the state budget is in a prudent condition. Some indicators she presented include: the state budget deficit that continues to decline, the primary balance deficit that has been successfully reduced to close to Rp0, tax revenue that has increased significantly and the growth of debt financing that has also declined.

“The state budget deficit declines every year. In 2014, commodities dropped so that the economy was under pressure. At that time, the state budget deficit was 2.3% of the GDP and is now heading to 2,1% in 2018. Even the outlook for 2018 might be close to 2%. In 2019, for the first time we will reach deficit of 1.8 (%),” said Sri.

In terms of the primary balance deficit, Sri explained that the decline in state budget deficit was followed by a decrease in the primary balance deficit, showing that the ability to pay interest on debt from various sources of state revenue (taxes and non-tax revenues) increases. “Right now the primary balance is almost Rp 0 or close to balance. This is a very clear evidence that our fiscal policy is prudent. A prudent state budget shown by the increase of tax revenues,” she said, adding that revenues from increased tax revenues also contribute 81% to the state budget’s stability, where debt is only a supplementary factor.

At the same time, 74% of the total state revenue was derived from taxes, which in 2018 has increased to 81%. “The state budget increase still highly relies on taxes. Debt is only supplementary, not the main factor. Tax revenue remains the backbone of our economy,” Sri added.

The tax revenue also indicates the Government’s commitment to support the independence of the state budget and to reduce dependence on debt financing, citing the example in 2018, when debt financing dropped by 9,7% compared to that 2014 which saw a 14.6% increase.

This condition was followed by a decline in government net bonds issuance that reaches 12.2% in 2018, lower than the growth of net bonds in 2014 of 17.8%. (UN / DND / FID / AGG / ES) (Estu/Ersan/Naster)

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