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Gerindra lawmaker denies rumors about plan to change State Finance Law
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Deputy House of Representatives Speaker Lodewijk Paulus (left) and Sufmi Dasco Ahmad (right) pose with an elected member of the State Audit Agency (BPK), Slamet Edy Purnomo (center), in Senayan, Jakarta, on June 13, 2023. (Antara/Rivan Awal Lingga)
A
member of Prabowo Subianto’s Gerindra Party who also heads the president-elect’s transition team has denied a report about alleged plans of the incoming administration to revise the State Finance Law.
The report published by Tempo on July 7 cites three anonymous sources in the government and House of Representatives toying with the idea of amending Law No. 17/2003 on state finances to raise the fiscal deficit and debt caps.
Such a move could portend a relaxation of fiscal discipline that on the one hand would accommodate higher budget spending but on the other may erode market confidence around Indonesian government debt.
The law mandates that the state budget deficit, the shortfall that occurs when the government spends more than it collects from taxes and other revenue sources, must not exceed 3 percent of gross domestic product (GDP) in a fiscal year. It also limits the country’s accumulated debt to a maximum of 60 percent of GDP.
These restrictions are meant to ensure fiscal policy discipline to prevent a monetary crisis, like the one that hit the country in 1997 and 1998.
Since the law’s passage, Indonesia has not breached either limit, except during the COVID-19 pandemic, when the government temporarily lifted the deficit cap to alleviate the economic impacts of the virus containment measures by amending the 2003 law.
The policy measure pushed the fiscal deficit to as high as 6.14 percent of GDP in 2020, while the debt-to-GDP ratio rose to almost 40 percent but stayed well clear of the 60 percent limit.
