Indonesia: 2021 budget deficit, debt issuance outperforms targets

• Indonesia’s full-year budget deficit and debt issuance closed well below targets in 2021, paving the way for an upcoming fiscal consolidation as the economy rides out the COVID-19 pandemic.
• Finance Minister Sri Mulyani Indrawati said that the 2021 budget deficit was at IDR783.7tr or 4.65% of gross domestic product (GDP). The figure is “far below” the planned IDR1qd or 5.7% of GDP.
• Debt issuance closed at IDR867.4tr or 86.3% of the 2021 target. The debt is 30% lower than in 2020 when issuance jumped to fund COVID-19 relief programs. These bring the government closer to reinstating a budget deficit cap of 3% of the GDP by 2023 as required by prevailing regulations. “Fiscal consolidation has been solid,” said Sri Mulyani.
• The lower deficit was made possible due to significant increases in state revenue last year, when collection increased 21.6% annually to IDR2qd. The figure exceeded the IDR1.7qd target set in the 2021 state budget.
• Tax revenue remained the largest contributor at IDR1.2qd, followed by nontax state revenue (PNBP) at IDR452tr and customs and excise at IDR269tr. All three exceeded targets and grew 20% to 30% annually.
• Meanwhile, government spending reached IDR2.7qd, slightly higher than planned in the state budget, which is also a rare occurrence.
• However, the government fell short in disbursing the national economic recovery (PEN) budget, spending just 88.4% or IDR658.6tr of the total budget. Assistance for micro, small and medium enterprises (MSMEs) and priority programs booked the lowest realizations at 71.5% and 89.3%, respectively, due to difficulties in implementation, Sri Mulyani said.
• Health care and social assistance fared slightly better, reaching more than 90% each of their respective targets. Only business and tax incentives surpassed their budgets.
• In 2022, the government will spend more on developing the upcoming new capital city in East Kalimantan and preparing for the 2024 general elections.
• The government would also allocate a PEN budget for the third year in a row, but at IDR414tr, the budget would be 44% smaller y/y.
• The Office of the Coordinating Economic Affairs Minister will lead the formulation of the latest PEN budget based on the recovery of eligible economic sectors.
• On the revenue side, the Finance Ministry plans to focus on executing the second tax amnesty, which was introduced under the Harmonized Tax Law passed last year. The law also raises VAT rates, increases taxes on high-net-worth individuals and introduces carbon taxes.
• Sri Mulyani expects next year’s fiscal deficit to come in at 4.1% of GDP, much lower than the 4.85% it set in the national budget.

External Link : https://www.thejakartapost.com/business/2022/01/04/2021-budget-deficit-debt-issuance-outperform-targets.html

External Link : https://www.todayonline.com/world/indonesia-2021-budget-deficit-smaller-target-2022s-gap-seen-narrowing-1782531