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Govt brushes off state revenue concerns
The government is confident the decline in the oil price will not dramatically reduce non-tax state revenue (PNBP) and therefore will only minimally impact the state budget
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The government is confident the decline in the oil price will not dramatically reduce non-tax state revenue (PNBP) and therefore will only minimally impact the state budget.
Finance Ministry's director general for budgeting, Askolani, said the government had conducted an assessment of the current oil price situation and was of the opinion that the declining price would not significantly impact the budget.
'Yes, our oil price assumption in the 2015 state budget was US$60 per barrel, but that was the average annual price assumption. We will have to monitor the price movements in the coming weeks and months, but I don't think it will change the average price by that much,' he said on Tuesday.
According to Askolani, if the oil price continues its downward trend, it may only deviate by $5 per barrel, leaving the average annual price at $55 a barrel.
Bloomberg reported that oil had finally rebounded on Tuesday from a six-year low as West Texas Intermediate for October delivery climbed by as much as $1.59 to $39.83 per barrel on the New York Mercantile Exchange.
Meanwhile, the price of Brent for October settlement gained as much as $1.81, or 4.2 percent, to $44.50 a barrel on the London-based ICE Futures Europe exchange.
Despite the rebound, overall crude still slumped more than 35 percent since this year's closing peak in June, according to Bloomberg.
Askolani said that the falling oil price might impinge the non-tax state revenue, but argued that the ongoing currency depreciation would offset the fall.
'It is important to note that oil transactions are made and recorded in US dollars on our books. When we formulated the 2015 state budget early this year, the dollar had not yet strengthened this much. So the depreciation may just turn positive for the PNBP,' he said.
Volatility in the exchange rate continued as the rupiah ended at 14,045 against the greenback on Tuesday, data from Bloomberg showed. The currency has so far weakened by 13.4 percent since the end of last year.
Meanwhile, the revised state budget shows that the government aims to post Rp 269.1 trillion ($19.13 billion) in the non-tax state revenue. About Rp 81.4 trillion of that figure is expected to come from oil and gas.
However, this year's oil and gas revenue is Rp 142.9 trillion lower than revenue in 2014 due to the lower Indonesian Crude Price (ICP) and lower oil-lifting target.
The government, according to Askolani, is still looking at 2.23 percent in the budget deficit forecast for 2015. He added that it had set aside around Rp 5 trillion in 'fiscal risk reserves' that it could use when needed.
Separately, Said Abdullah, an Indonesian Democratic Party of Struggle (PDIP) politician who served as deputy chairman on the House of Representatives' budget committee, predicted that the government would miss its budget deficit estimate this year due to the oil price plunge.
Meanwhile, Golkar Party lawmaker Mukhamad Misbakhun insisted that the government should properly manage its fiscal risks, so that the budget deficit did not stray too far from its 2.23 percent target.
'Who could've predicted the oil price would plunge below $100 per barrel? However, the price could also climb in the future and what the government can do now is to closely monitor its budget,' he said.
