Indonesia's Budget Deficit Narrows in January Thanks to Higher Oil Price

Finance Minister Sri Mulyani Indrawati said Indonesia will revise its tax incentives and offer them to a larger number of business sectors, in a bid to attract more investment. (Antara Photo/Muhammad Adimaja)

By : Adinda Normala | on 11:47 PM February 20, 2018
Category : Business, Economy

Jakarta. Indonesia ended the first month of the year with a lower budget deficit compared with the same period last year, as windfall revenue from higher oil prices and a spike in tax receipts offset moderate spending by government agencies.

As of Jan. 31, the Ministry of Finance recorded a Rp 37.1 trillion ($2.7 billion) budget deficit, which represents 0.25 percent of the country's gross domestic product. The budget deficit in the corresponding period a year earlier stood at Rp 44.9 trillion, or 0.33 percent of GDP.

The government aims to keep the state budget deficit at Rp 325.9 trillion, or 2.19 percent of GDP for the full year, compared with last year's Rp 336.4 trillion deficit, which amounted to 2.48 percent of GDP.

"The realization of the state budget in January 2018 showed an increase and creates optimism for better performance this year," Finance Minister Sri Mulyani Indrawati said at a press conference in Jakarta on Tuesday (20/02).

State revenue in January stood at $101.4 trillion, up 14 percent from the same period last year.

The government collected Rp 78.94 trillion in tax revenue, or 11.17 percent more than last year – the biggest increase in four years, the minister said.

Rising global oil prices boosted non-tax revenue by 33 percent to Rp 18.89 trillion.

Overall, the government has so far managed to collect 5.3 percent of the Rp 1,894.7 trillion target set in the 2018 state budget.

Total government spending – including spending by ministries, government agencies, village funds and funds transferred to regional governments – stood at Rp 138.4 trillion, having increased 3.9 percent from January last year. The government has set a total spending target of Rp 2,220.7 trillion for this year.

Still, if the global oil price remains at its current level of $65 per barrel – 35 percent higher than the $48 per barrel outlined in the 2018 state budget – the government would have to devise alternatives to mitigate its risk.

According to a government simulation, a dollar increase in the oil price can lead to a Rp 200 billion to Rp 900 billion budget surplus.

But it may also "lead to higher inflation," said Suahasil Nazara, head of the fiscal office at the Finance Ministry.

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