The House of Representatives passed the 2020 state budget on Tuesday, authorizing the government to spend close to $181 billion next year to try to avoid an economic downturn amid a risk of recession in developed economies and a global trade war. (Antara Photo/Puspa Perwitasari)

House Passes 2020 State Budget

SEPTEMBER 24, 2019

Jakarta. The House of Representatives passed the 2020 state budget on Tuesday, authorizing the government to spend close to $181 billion next year to try to avoid an economic downturn amid a risk of recession in developed economies and a global trade war. 

The House and the government agreed to set a budget deficit target of Rp 307 trillion ($22 billion), or 1.76 percent of gross domestic product, narrower than this year's deficit of 1.94 percent, according to the latest estimate by the Ministry of Finance.

The budget earmarks total state spending of Rp 2,540 trillion next year, up 8.5 percent from this year, while revenue is estimated at Rp 2,233 trillion for 2020. 

"During the process of preparing the 2020 state budget, we were confronted by very volatile dynamics in the global economy and geopolitics, which deviate from historical patterns, creating protracted uncertainty, while an escalating trade war between the United States and China, as the world's two largest economies, increases the uncertainty, making it difficult to predict," Finance Minister Sri Mulyani Indrawati told the House. 

The minister said the 2020 state budget would primarily focus on improving the quality of the country's human resources through strengthening the education system and providing training assistance. The government will expand its cash assistance program from school students to university students and graduates, Sri Mulyani said.  

The second priority will be the development of infrastructure to spur national economic growth in the medium and long term, and to promote job creation.

Thirdly, the government will provide incentives to improve competitiveness in human-resources-based vocational, research and development activities, as well as in labor-intensive industries.

The next priority is strengthening fund transfers to regions for equitable development throughout the archipelago.

The fifth priority involves boosting endowment funds in the education sector to improve human resources, promote national culture, develop research and improve the quality of tertiary institutions to turn them into world-class universities, the minister said. 

The budget is based on projected economic growth of 5.3 percent and an inflation rate of 3.1 percent, while the rupiah exchange rate is assumed at 14,400 to the US dollar and energy production at 1.19 million barrels of oil equivalent per day.

The government and the House lowered the price assumption for Indonesian crude oil to $63 per barrel, from an earlier proposal of $65. Assumed oil production was also increased to 755,000 barrels per day from the initial 734,000.

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