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2022 deficit to drop below 4% despite subsidy hike: Govt
The government is optimistic that the budget deficit will drop to less than 4 percent of GDP this year despite increased spending to shield Indonesians from global shocks.
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Finance Minister Sri Mulyani Indrawati holds a press briefing on July 1, 2022 regarding the voluntary disclosure program, dubbed the second tax amnesty. (DJP/Public Relation)
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he Finance Ministry is confident that the state budget deficit will drop below 4 percent of gross domestic product (GDP) this year, pointing to faster-than-planned fiscal consolidation despite increased spending to shield Indonesians from surging global energy prices.
After a second downward revision, the ministry now expects the difference between state revenue and spending to reach just 3.92 percent of GDP, much lower than its previous projection of 4.5 percent as well as the budget plan’s original assumption of 4.85 percent.
The latest figure allows the government to cut bond issuance to Rp 757.6 trillion (US$50.56 billion), a fifth of the amount stated in the initial budget plan for this year.
“The much lower deficit shows that our state budget is healthier [due to] our strategy for dealing with volatile conditions, especially in the financial sector, with global inflation and rising interest rates,” Finance Minister Sri Mulyani Indrawati told lawmakers in a meeting with the House of Representatives Budget Commission on Friday.
Read also: Executive Column: JP Morgan positive on Indonesia’s outlook in volatile markets
Shortly after gaining some breathing space from the pandemic, the world economy is facing yet another hurdle as inflation rises at a pace rarely seen in history, with pent-up demand and wide-scale supply disruption causing commodities prices from energy to food to skyrocket.
Led by the United States Federal Reserve, central banks around the world have raised their interest rates at a speed also not seen in decades, raising concerns about some countries’ ability to service debt.
