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Jakarta Post

SBY maintains status quo in 2015 budget

  • Satria Sambijantoro and Ina Parlina

    The Jakarta Post

Jakarta   /   Mon, August 18, 2014   /  08:51 am
SBY maintains status quo in 2015 budget

While President Susilo Bambang Yudhoyono has pledged to assist his successor wherever necessary, his proposed 2015 state budget appears to indicate an attempt to maintain the status quo.

In the draft state budget, the current government has proposed no plans to reduce spending on subsidies, despite energy subsidies swallowing 15 percent of the state budget of Rp 2,020 trillion (US$172 billion).

Yudhoyono instead raised the allocation for energy subsidies to Rp 363.5 trillion from the Rp 350.3 trillion in the 2014 budget. Of this fuel subsidies alone account for Rp 291.1 trillion, rising from Rp 246.5 trillion in this year'€™s budget.

'€œThe fuel subsidy is still too big; there is so much spending that would be more efficient, which would provide greater fiscal room [for reforms]'€ president-elect Joko '€œJokowi'€ Widodo told reporters after the Independence Day ceremony at the State Palace on Sunday.

The lack of fiscal room for development and growth-generating programs means that Jokowi'€™s campaign pledge to spur economic growth to 7 percent within five years may not be achieved.

Fund allocations for development programs remained miniscule, Jokowi complained. '€œThe hope here is that we can see the spending on development programs grow over time; instead of seeing the enlargement of growth for mandatory and subsidy spending,'€ he said.

Inefficient state spending was also reflected by the fact that Yudhoyono has maintained the current status quo in terms of distributing funds to ministries, though this strategy has been widely criticized.

Funding for the Public Works Ministry, responsible for growth-generating infrastructure projects, will stand at Rp 74.2 trillion next year, or Rp 300 billion less than was earmarked in the revised 2014 state budget.

The lower allocation for the Public Works Ministry was in contrast to the increased allocation for the Defense Ministry, which will receive Rp 95 trillion, or Rp 11.7 trillion more than this year.

Yudhoyono also maintained high allocations for ministries frequently under the spotlight for their poor budget disbursement and corruption, such as the Religious Affairs Ministry, which has been earmarked Rp 50.4 trillion, the fourth-largest fund allocation of any ministry.

'€œThe latest budget'€™s structure shows that there isn'€™t any '€˜performance-based mechanism'€™ applied there, as some ministries with questionable track records in budget management are still able to receive higher funding,'€ said Telisa Aulia Falianty, an economist with the University of Indonesia (UI).

Although government officials have described the budget as a '€œbaseline'€, meaning it will offer ample space for the new government to revise it, Telisa argued that any drastic alterations would not be possible.

'€œIn practice, major changes in mandatory spending will be very difficult to implement,'€ she said on Sunday. '€œThis will lock in the new government if they want to push for reforms.'€

Next year, any chance of spurring economic growth would only come through a brave move to hike fuel prices and allocate the funds to sectors considered as productive in having a multiplier effect on the economy, such as infrastructure and tax incentives, Bank Mandiri chief economist Destry Damayanti said.

She argued that the 5.6 percent economic-growth target stipulated in the proposed 2015 state budget might not be achievable with only a 10 percent growth in total spending next year.

'€œThe growth target can be reached if Jokowi is brave enough to cut the fuel subsidies, which is painful in the short-term, but attractive for the medium- to long-term,'€ she said.

'€œI think the current government will not take this final opportunity to cut the fuel subsidy, even though they can save around Rp 48 trillion in the budget, according to my team'€™s calculations,'€ Destry added. (gda)

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