Jakarta. Finance Minister Sri Mulyani Indrawati said on Monday (10/09) that a slump in the rupiah would be a net benefit for government income this year, seeking to reassure the national legislature that the country's budget would not be thrown out by an emerging market rout.
The rupiah has slid 9 percent against the dollar so far this year and is trading at its weakest levels since the Asian financial crisis in 1998.
The 2018 budget assumed the rupiah exchange rate would average 13,400 to a dollar. The rupiah was down 0.4 percent on Monday at 14,870.
Sri Mulyani said every 100 rupiah rise in the dollar exchange rate means the government would get an additional Rp 4.7 trillion ($316 million) of income, while its spending would increase only Rp 3.7 trillion.
"But managing the state budget is not about profits or losses. If the budget is healthy, we can use it as an instrument to manage the economy better," she said during a hearing for the 2019 budget proposal.
Sri Mulyani said growth in total government income as of August was "quite high and consistent," with a 15 percent rise in tax revenue being the highest in the past three years.
Last month, President Joko "Jokowi" Widodo presented a proposal for the 2019 state budget with a fiscal deficit of 1.9 percent of gross domestic product, below this year's estimate of 2.1 percent.
"Now that yields are higher, we must be more careful and that's why we designed a smaller fiscal deficit at a time of rising debt servicing costs. We consolidate a stronger fiscal policy," she said.
The focus for policy makers next year is still stability, the minister said, predicting more risks to global economic growth coming from higher interest rates in advanced economies and the US-China trade war.
The benchmark 10-year bond yield rose to 8.583 percent on Thursday, the highest since January 2016, before starting to fall. On Monday, the yield was at 8.444 percent.