Press Statement of President of the Republic of Indonesia on Government Regulation in lieu of Law (Perppu) on State Finance Policy and Financial System Stability
Assalamu’alaikum warahmatullahi wabarakatuh,
Peace and prosperity be upon us all,
Greetings of Virtue.
My Fellow Countrymen,
As many as 202 countries, including Indonesia, are facing severe challenges on an unprecedented scale. The COVID-19 pandemic does not only take a toll on the people’s health, but also brings a broader economic repercussion.
Due to this emergency situation, I have just signed a Government Regulation in lieu of Law on State Finance Policy and Financial System Stability. The regulation will serve as a foundation for the Government, banking authorities, and financial authorities to take extraordinary measures to ensure the people’s health, safeguard national economy, and maintain financial system stability.
The Government has decided that the total state spending for the 2020 State Budget in handling COVID-19 outbreak is up to Rp405.1 trillion. The total budget that will be allocated amounts to Rp75 trillion for healthcare spending, Rp110 trillion for social protection, Rp70.1 trillion for tax incentives and credit for enterprises, and Rp150 trillion for economic recovery programs, including credit restructuring and financing for small and medium businesses.
My Fellow Countrymen,
The healthcare sector budget will be prioritized for the protection of health professionals, especially for the purchase of protective gear (APD), medical equipment such as test kits, reagents, and ventilators, and also to improve referral hospitals, including the Athlete Village, to provide incentives for doctors, nurses, and other medical workers, compensation for the death of medical workers, as well as for handling other healthcare issues.
The social protection budget will be prioritized for the 10 million families in the Family Hope Program (PKH), which is raised from the initial 9.2 million beneficiary families. The budget will also be used for the 20 million families in the Staple Food Cards program, which is raised from the initial 15.2 million recipients. The budget for the Pre-Employment Card will be raised to Rp20 trillion from the initial Rp10 trillion to cover 5.6 millions of workers and informal workers who are laid off, as well as for small business owners. It will also include three months of free electricity for 24 million customers using 450 KVa and a 50 percent electricity discount for 7 million customers using 900 KVa. It also includes basic logistical support and basic needs amounting to Rp25 trillion.
For the economic stimulus for MSMEs and business actors, it will be prioritized for the employee income tax waiver (PPh 21) to workers in the manufacturing sector with revenue below Rp200 million per year and will be exempt from revenue taxes for taxpayers in ease of import for export purposes, especially for small and medium enterprises in 19 specific sectors. The budget also will be used to cut income tax by up to 25 percent for taxpayers in ease of import for export purposes, especially small and medium enterprises in certain sectors. The acceleration of VAT refunds in 19 manufacturing sectors aims to maintain business liquidity. The corporate income tax also will be cut from 25 percent to 22 percent. The debt payments will be delayed by six months for micro loan credit for businesses affected by the COVID-19 break.
For non-fiscal sector in ensuring the availability of the goods that are currently needed, including industrial raw materials, the Government will implement several policies, including simplification of export restrictions, simplification of limited restrictions or import limited restrictions, and speeding up of export-import process services through national logistics ecosystem.
Ladies and Gentlemen,
The Government, along with Bank Indonesia and the Financial Services Authority (OJK), continue to optimize both monetary policy and financial sector to provide support and maintain stability of national economy. Bank Indonesia has issued a monetary stimulus policy through a triple intervention intensity policy, reduced the mandatory minimum ratio for foreign exchange of conventional commercial banks, and expanded underlying transactions for foreign investors and the use of global and domestic custodian banks for investment activities.
The Financial Services Authority has also issued several policies, including relaxation and/or postponement of credit or leasing payments up to Rp10billion. It includes MSMEs and informal workers for a maximum of 1 year, as well as providing relaxation and/or postponement of credit or leasing payments without ceiling restrictions according to the debtor pay ability and agreed with the bank or leasing agency.
We also issued this Perppu to anticipate the possibility of a budget deficit estimated to reach 5.07 percent. Therefore, we need the relaxation of the State Budget deficit policy above three percent of the Gross Domestic Product. However, the relaxation of the deficit will apply for only three years, namely for 2020, 2021, and 2022. Afterwards, we will return to imposing a fiscal discipline of below three percent deficit starting in 2023.
Lastly, I expect support from the House of Representatives of the Republic of Indonesia (DPR RI). The Perppu that I just signed will be enacted and will be implemented immediately, and in the soonest time, we will submit it to the House to be passed as law.
And that concludes my statement.
I thank you.
Wassalamu’alaikum warahmatullahi wabarakatuh.
Tuesday, 31 March 2020 at Bogor Presidential Palace, West Java Province
Translated by : Syarifa Aisyah
Reviewed by : M. Ersan Pamungkas