President Joko "Jokowi" Widodo leads a cabinet meeting on Tuesday. (Antara Photo/Hafidz Mubarak A.)

As Money Printer Goes Brrr, The Onus Is Now on Bureaucrats to Spend


JULY 09, 2020

Jakarta. There is a new item in President Joko "Jokowi" Widodo daily agenda now: looking at the day-to-day progress of the ministries state budget spending. 

The economic-first president has been lamenting how slow the ministries and government institutions spend the $48.6 billion stimulus package as Indonesia's economy now likely to have shrunk by three percent in the second quarter this year. 

As of July 5, the government had only disbursed 17 percent of the stimulus budget, and that was not because the government didn't have any money.

Bank Indonesia, the country's central bank, stands ready to cover that part. On Monday, the central bank agreed to step up its unorthodox monetary policy by not only buying Indonesia's sovereign bonds directly from the government but also by paying for the interest on some of those bonds too. 


Instead, it seemed the ministry's paperwork dragged the stimulus spending. 

"We have to change the mindset from the ordinary ones to extraordinary; From the previously complicated methods to fast and simple ways; From normal SOP [standard operating procedure] to a smart shortcut," Jokowi said in a cabinet meeting on Tuesday, which the recording was made available to the press on Wednesday.

"How do you do it, ladies and gentlemen know better than me, finish this," Jokowi said. 

"I will now be looking at the ministries' spending daily," he said.

Jokowi said the government spending holds the key for an economic recovery in the third quarter, after the $1 trillion economies slowing down so far this year amid social restrictions government put in place to curb Covid-19 pandemic. 

The Finance Ministry estimated the largest economy in Southeast Asia to have shrunk by 3.8 percent in the second quarter compared to the same quarter last year and is likely to book a zero growth in the third quarter. That compared to a 2.97 percent growth in the first quarter and around 5 percent expansion in the past five years.

The ministry's base scenario now expects Indonesia to back to an expansion mode in the fourth quarter, growing by 3 percent. 

The government announced a Rp 405.1 trillion ($28 billion) stimulus in April and later expanding it to Rp 965.2 trillion in June. The additional spending, coupled with lower tax revenue amid the pandemic, widened the deficit. 

The government is now expecting ts deficit to widen to 6.34 percent of the gross domestic product this year, compared to the initial plan of 1.8 percent of the GDP. It planned to raise Rp 900 trillion in debts in the next six months fo finance the deficit after issuing sovereign bonds worth Rp 631 trillion since the beginning of the year. 

The spending progress, however, has been slow. 

The government only had spent 4.7 percent of Rp 87.6 trillion stimuli for healthcare. This spending includes the bonuses Jokowi promised to doctor, nurses, and medical workers fighting in the frontline to contain Covid-19 pandemic.

But, the government was slow to verify their data, and only a few have received the bonus. 

Financing support for the state-owned enterprises and corporations fared even worse, with none of the Rp 53.6 trillion stimulus have been disbursed. 

On the bright side, the largest part of the stimulus spending, which earmarked for the social safety net, was on track. The government had spent 34 percent of the Rp 204 trillion budget for cash transfer for the poor, unemployment benefits, electricity subsidies, and social aid.