Faster Govt Spending Raises Deficit Forecast
Jakarta. The finance ministry reported that the government has spent more in the first three months of this year than during the same period in 2015, hinting that a higher budget deficit was in sight.
Indonesian ministries and agencies spent Rp 82.7 trillion ($6.3 billion) in the January-March period, or almost 11 percent of the Rp 784.1 trillion allocated in the 2016 state budget. In the same period last year, the government spent Rp 56 trillion, or around 7 percent of its Rp 795.5 trillion allocation.
"My concern is over the revenue target, which will be rather hard to achieve. The government will cut some spending, but it will be hard to reach the targeted 2.15 percent deficit. [The deficit] could even go as high as 2.5 percent," Eric Alexander Sugandi, an economist with the Jakarta-based think tank Kenta Institute, said on Tuesday (12/04).
"I'm not really worried about budget absorption this year, it's already better than last year," he said.
In the 2016 state budget, the government has set a target of Rp 1,360.2 trillion in tax revenue, up 28.2 percent from last year's Rp 1,060.85 trillion to cover higher expenditure this year.
Total expenditure in the 2016 state budget stands at Rp 2,095.7 trillion, 17 percent higher than last year's total spending, which was Rp 1,796.6 trillion, 6 percent higher than the Rp 1,984.1 trillion in 2015's revised state budget.
So far, the government's tax earnings have only reached Rp 188.1 trillion by the end of March, or around 14 percent of this year's target.
Finance Minister Bambang Brodjonegoro previously told reporters that a revised version of the 2016 state budget – which is currently being drafted – could push the deficit up to 2.5 percent of gross domestic product from the current 2.1 percent.
"I think if the government set the deficit at 2.5 percent in the revised state budget this year, players in the financial market may express some concerns at first, but then things will get back to normal," Eric said.
He said the government would function better if it loses the pressure of having to reach the 2.1 percent GDP deficit target.
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