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House passes 2022 state budget with 4.85% deficit
The passing of the bill marks the beginning of Indonesia's fiscal consolidation.
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Finance Minister Sri Mulyani Indrawati speaks at the House of Representatives on Sept. 13 2021. (Finance Ministry/Public relation team)
T
he House of Representatives passed on Thursday the 2022 state budget bill into law, marking the beginning of Indonesia's fiscal consolidation, after nearly two years of heavy spending on COVID-19 relief efforts.
The newly passed bill set Indonesia’s deficit at Rp 868 trillion (US$60.61 billion) next year, equivalent to 4.85 percent of gross domestic product (GDP), the same numbers mentioned by President Joko “Jokowi” Widodo during his draft state budget speech on Aug. 16. The deficit was lower than the 6.14 percent run up last year and the 5.8 percent target for this year.
Finance Minister Sri Mulyani Indrawati said the approved bill could help Indonesia reinstate the below 3 percent budget deficit cap starting 2023, which was mandated by Law No. 2/2020 on the government's COVID-19 response. The law only allowed the government to exceed the cap in 2021 and 2022.
“We will keep watch on the [state budget's] financing carefully, especially anticipating the global economic situation with the possibility of tapering and geopolitical changes,” Sri Mulyani told reporters after a plenary meeting on Thursday.
Read also: Fed taper fears: How vulnerable is Indonesia’s economy?
The deficit is the result of the government’s plan to spend Rp 2.71 quadrillion, and collect Rp 1.85 quadrillion in state revenue next year. The shortage of funds will be covered with Rp 973.6 trillion in debt issuance. Both spending and revenue are slightly higher than in the draft, while debt remains the same.
