T

he government is seeking an additional US$5 billion to finance the budget this year, as the budget deficit is expected to increase from previous estimates.

According to Scenaider CH Siahaan, director for the strategy and financing portfolio at the Finance Ministry'€™s financing and risk management office (DJPPR), this year'€™s budget deficit may exceed the 2.23 percent that was previously expected.

'€œWe have not come up with an official calculation, but we think that the deficit will increase because tax revenue from the tax reinvention policy has not been especially large. Revenue from customs and excise has not been optimum either,'€ he said on Tuesday.

'€œAt the same time, we are planning to finance various infrastructure projects as soon as possible. The President has ordered us to expedite their tender process in 2015, and we need additional funds for that,'€ Scenaider said, adding that the government hoped to begin tenders for projects in October. The revised 2015 state budget puts the deficit target at 1.9 percent, but the government has repeatedly stated that the target is expected to increase to 2.23 percent.

The increase will bring the deficit to around Rp 260 trillion ($17.95 billion) from the previous Rp 222.5 trillion set out in the revised budget.

Meanwhile, extra funds will be generated from several sources, including multilateral and bilateral loans, according to Scenaider.

'€œWe already have standby loans worth $1.2 billion from several sources, including the World Bank, ADB [Asian Development Bank] and KfW Development Bank,'€ he said.

He added that the World Bank had agreed to provide an additional $2 billion, while the ADB would provide an extra $1 billion to be handed over between November and December.

The remaining funds are expected to come from a securities issuance under a private placement scheme. '€œIt will amount to around $800 million to $1 billion,'€ he said.

According to Scenaider, the Finance Ministry is in talks with several parties as it searches for the right investor for the private placement and it hopes to complete the process before year-end.

Besides being used to cover the deficit and to finance infrastructure projects, the extra funds will also be spent on boosting the currently declining foreign exchange (forex) reserves.

'€œThat'€™s why we have decided to seek the extra funds in US dollars, so that they can complement the forex reserves. This is part of our coordination with the central bank,'€ Scenaider said.

As reported before, the forex reserves have been in decline since March. As of September they stood at around $103 billion, having fallen from $105.3 billion in August and $111.6 billion in March, according to data from Bank Indonesia (BI) not yet officially released.

The reserves were reportedly used as part of BI'€™s efforts to stabilize the fluctuating rupiah against the US dollar and to repay the private sector'€™s maturing external debts.

BI Governor Agus Martowardojo claimed the latest figure was still within a safe level and that other options remained available if it required additional funding.

The list of options currently includes a $15 billion bilateral currency swap arrangement (BCSA) with China and a $22.76 billion bilateral swap arrangement (BSA) with Japan.