T

he government may have to further modify the state budget as several of the economic targets will be difficult to achieve as a result of the sluggish performance of the global economy, Vice President Jusuf Kalla has admitted.

Although the state budget was revised only two months ago, some of the economic targets needed to be adjusted in line with the latest developments in the world economy, Kalla said.

The government'€™s revenue target, in which tax receipts alone were projected to grow 30 percent this year, might be reevaluated, Kalla said in an interview with The Jakarta Post recently.

'€œThe realization [of the budget] faces huge challenges because of the global economic slowdown and we may need adjustments based on these developments,'€ he said, when asked whether the government would propose further changes in the revised 2015 state budget to lawmakers.

In the budget, the government has targeted total state income of Rp 1.76 quadrillion, most of the funds coming from tax revenues, which are expected to soar 30 percent year-on-year to hit Rp 1.29 quadrillion this year.

The World Bank has cautioned that the 30 percent yearly growth in tax revenues is unrealistic, warning about a potentially huge shortfall that could pose fiscal risks to the economy.

'€œOn the issue of tax, the draft was formulated last year [...] when we were still upbeat about the outlook for state revenues,'€ said Kalla. '€œGiven the impact of falling oil and commodity prices on our revenues, we now realize that the targets need to be reevaluated.'€

President Joko '€œJokowi'€ Widodo has built his economic platform on ambitious targets as he seeks to fulfill his presidential pledge to spur economic growth to 7 percent by 2017.

In late January, Jokowi presented to the House of Representatives his revised 2015 state budget, which had been prepared by former president Susilo Bambang Yudhoyono, in order to support his economic goads.

In order to boost growth, Jokowi, for example, allocated at least Rp 276 trillion for infrastructure projects, or capital expenditure (capex) spending, which is almost 75 percent higher than the Rp 156.4 trillion in the original budget, or about 45 percent higher than the Rp 190 trillion in the 2014 budget.

However, the latest official data show that the Jokowi administration is under-performing in regard to the realization of its economic goals. As of the first quarter this year, total state revenues stood at Rp 273 trillion, with tax revenue hitting only Rp 198 trillion, or 5.6 percent lower than the same period a year earlier

In the first quarter, total state spending amounted to Rp 367 trillion, relatively higher than last year, but most of the realization came from mandatory spending such as civil servants'€™ salaries, while the execution of infrastructure projects has lagged behind target.

For example, the Public Works and Public Housing Ministry, which is responsible for infrastructure projects, only absorbed 3 percent of its earmarked budget and had awarded 70 percent of its targeted tender projects by the end of March, according to data compiled by Bank of America Merrill Lynch.

Kalla said some ministers, most of whom are first-timers in senior government positions, might need more time to adapt to his and Jokowi'€™s ambitious economic targets.

He argued that the back-pedalling on some government policies, such as the uncertainty surrounding the new toll road tax and the visa-free policies, should be seen as valuable learning experiences for ministers.

'€œIf the government continuously alters its policies, of course there must be a perception that it is inconsistent,'€ he acknowledged.

'€œThat'€™s a consequence that a policymaker must face from [his or her] carelessness. The valuable lesson is; do not issue a policy about which we do not have a strong conviction.'€

The recent under-performance of the economy might slow economic growth to below 5 percent in the first quarter, Mandiri Sekuritas chief economist Aldian Taloputra said.