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Govt prepares for 'turmoil' with prudent 2023 budget
The budget plan for next year reflects determination to bring the deficit back down below 3 percent of GDP and leave enough fiscal space for any eventuality.
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President Joko 'Jokowi' Widodo delivers his State of the Nation address ahead of the country's Independence Day at the House of Representatives in Central Jakarta on Aug. 16. (Reuters/ Tatan Syuflana/Pool )
T
he budget plan for next year reflects determination to proceed with fiscal consolidation while also leaving some room to react to possible impacts from a worsening global economy.
The government envisions the budget deficit dropping to 2.85 percent of GDP in 2023, back below the usual 3 percent limit that was only temporarily increased in 2020 to allow for extra spending in response to the COVID-19 pandemic.
The deficit planned for next year would be much lower than the 3.9 percent projected for this year, which, in turn, is lower than the 4.5 percent stated in the revised plan for 2022.
The 2023 budget assumes a gap of Rp 598.2 trillion (US$40.6 million) between state revenue and spending, which is 28.8 percent down from the deficit of Rp 840.2 trillion stated in this year’s revised plan.
Given the much narrower gap, debt issuance is set to fall by 26 percent to Rp 696.3 trillion next year, which is a relief for state finances given the recent depreciation of the rupiah.
For its budget calculation, the government assumes a rupiah exchange rate of Rp 14,750 per US dollar next year and a 10-year government-bond yield of 7.85 percent, both of which imply that borrowing money will be more costly next year.
