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ndonesia could fall victim to its unrealistic and '€œoverly ambitious'€ tax collection target, and the government'€™s frantic and quick-fix approach to boost state revenue could also backfire in the medium-term, the latest World Bank report on Indonesia reveals.

In the report, the bank estimates there will be a shortfall of about Rp 282 trillion (US$21.4 billion) in state revenue this year, which is projected to reach Rp 1.7 quadrillion due to an unrealistic tax revenue target set by President Joko '€œJokowi'€ Widodo.

That could force the President to cut government spending and enlarge the budget deficit to 2.4 percent of gross domestic product (GDP) from 1.9 percent as stipulated in the revised 2015 state budget.

'€œThe full implementation of the spending plan is really challenged by this revenue shortfall,'€ Ndiame Diop, World Bank lead economist for Indonesia, said during the release of the bank'€™s quarterly economic report, titled High Expectations, in Jakarta on Wednesday.

Jokowi is betting on higher tax revenues to finance his growth-focused economic agenda, drastically increasing capital expenditure (capex) spending, which includes growth-generating infrastructure projects, to Rp 290 trillion from Rp 190 trillion last year.

To meet the tax revenue target of Rp 1.4 quadrillion, which is around 30 percent higher than last year, the government has implemented various tax reforms, from significantly increasing the salaries of employees in the Finance Ministry'€™s taxation office to jailing tax evaders.

The World Bank, however, said some of Jokowi'€™s ad-hoc tax policies may excessively focus on the short-term, and specifically criticized the possible imposition of a tax amnesty '€” a controversial policy that waives past prosecutions for Indonesians failing to comply with previous tax obligations, to lure them to reinvest money in the country.

'€œInternational experience suggests that tax amnesties, in general, do not have a significant effect on revenue collection, especially in the long term, and can negatively affect future tax morale and compliance,'€ the bank wrote in its report.

According to Finance Ministry data, in the first two months of this year, the government collected Rp 125 trillion, or 8.4 percent of its annual tax collection target of Rp 1.4 quadrillion.

'€œIf there is a shortfall [in tax revenues], then we will cut operational spending, not infrastructure spending,'€ said Robert Pakpahan, head of the Finance Ministry'€™s financing and risk management.

The government was ready to issue more bonds or tap standby loans to plug the budget gap caused by lower-than-expected tax revenue collection, he added.

Since the beginning of this year, the government has taken an aggressive stance in its bid to meet its revenue collection target, even going as far as jailing tax evaders in a special prison until they settle their tax obligations.

Some aggressive tax-collecting efforts have been canceled due to the controversies they caused. Last week, the government decided to postpone the imposition of new taxes on toll road users and revoke a regulation that required proof of bank deposit taxes.

The World Bank also noted that Jokowi had implemented encouraging reforms, from abolishing fuel subsidies and increasing infrastructure spending to streamlining business permits.

However, the moves should be followed by other, deeper reforms, such as additional investment in human capital and the institutional capacity to ensure the smooth budget execution of infrastructure projects, as Indonesia may have experienced a structural decline in its long-term growth potential

Diop says the potential long-term growth of Indonesia has declined from 6 to 5.5 percent due to the steady decline in investment, particularly in the manufacturing sector, as well as the persistently weak commodity prices.

'€œThe slowdown that we have been seeing is not a cyclical dip in growth, but is a partial reflection of the lowering in potential growth,'€ he said on Wednesday. '€œPolicymakers cannot just expect growth to rebound easily without the required reforms.'€

The bank predicted Indonesia would grow by 5.2 percent this year, higher than 5 percent last year, which is already the slowest level since 2009. President Joko '€œJokowi'€ Widodo has targeted the economy to grow by 5.7 percent this year.