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Yearender 2022: The year of turmoil to test govt’s fiscal consolidation
Despite facing many possible setbacks throughout 2022, Indonesia is still poised to accomplish its fiscal-consolidation plan in time, providing the country with a better foothold to withstand whatever looming global uncertainty will throw against it next year.
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Finance Minister Sri Mulyani Indrawati (middle) and Bank Indonesia Governor Perry Warjiyo (right) brief the press after the Group of 20 Finance Ministers' and Central Bank Governors' Meeting in Washington, DC, on Oct. 14. (Finance Ministry/Public Relation Team)
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espite facing many possible setbacks throughout 2022, Indonesia is still poised to accomplish its fiscal-consolidation plan in time, giving the country a better foothold to withstand whatever looming global uncertainty will throw at it next year.
In 2023, the annual-budget deficit must return to below 3 percent after being allowed to exceed the limit for the past three years, with 2022 the last year to do so as mandated by 2020 COVID-19 response law.
So far, the government has made sure the fiscal consolidation progressed smoothly with this year’s deficit projected to be around 3.92 percent of GDP or smaller, making it much lower than 2020 and 2021, when the deficit hovered at 6.09 and 4.65 percent of GDP respectively, according to the Finance Ministry.
“Our outlook: in 2022, the deficit will be much better than the projected 3.92 percent. It is possible that we can see the deficit go below 3 percent,” Febrio Kacaribu, the ministry’s head of fiscal policy agency told reporters on Dec. 1 in the House of Representatives, adding the deficit had only amounted to 0.91 percent as of October.
The ministry attributed the progress due to greater-than-expected tax revenue and a revenue windfall from high-commodity prices, which -- aside from lowering the deficit -- helped the government to slash debt issuance by half the amount initially planned.
The progress was once threatened by swelling fuel subsidy and “compensation” -- payables to state-owned energy firms -- to keep energy prices cheap amid high oil price and depreciated rupiah, albeit tripling the budget to Rp 502 trillion (US$32.14 billion). However, a decision was made to hike subsidized-fuel prices by 30 percent to avoid more damage to fiscal consolidation.
The government has set next year’s fiscal deficit to hover around 2.84 percent, not far from this year’s latest projection that might hit below 3 percent sooner than expected.
