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Jakarta Post

Jokowi calls for focus on healthcare, safety net as economists push for flexible budget

  • Adrian Wail Akhlas

    The Jakarta Post

Jakarta   /   Mon, March 23, 2020   /   07:35 am
Jokowi calls for focus on healthcare, safety net as economists push for flexible budget President Joko Widodo (second left) accompanied by SOE Minister Erick Thohir (third left) walk in the emergency room facility while reviewing COVID-19 Emergency Hospital, Athlete Village, Kemayoran, Jakarta, Monday, March 23, 2020. (Antara/Pool/Hafidz Mubarak A)

President Joko “Jokowi” Widodo has rallied ministers and regional administrations to refocus their budgets on healthcare, the disbursement of social funds and economic stimuli as economists call for a flexible state budget to help the country cope with the COVID-19 pandemic.

Jokowi said the pandemic posed a significant risk not only to public health but also to the economy, as global and domestic growth were expected to slow.

 “I ask you for three things: healthcare to mitigate COVID-19 risks, the disbursement of social funds and economic incentives for businesspeople as well as small and medium businesses,” Jokowi told ministers in a teleconferenced meeting on Friday.

The government will reallocate Rp 62.3 trillion (US$3.9 billion) of state spending from the 2020 budget to carry out the President’s instructions for tackling COVID-19, Finance Minister Sri Mulyani Indrawati said after the Cabinet meeting.

The allocated sum is a significant increase from the previous estimate of Rp 27 trillion – on top of the Rp 120 trillion of stimulus packages – as the government prepares for worst-case scenarios including the possibility of zero percent economic growth, ministers said.

“We’ve identified about Rp 62.3 trillion of planned spending that can be re-allocated to priority areas put forward by the President. This includes funding for business trips, blocked funds and non-operational purchases of goods, among other items,” Sri Mulyani said.

Read also: Jokowi urges ministers to focus budget on health care, social aid, economic stimuli

The government’s baseline scenario had been for Indonesia’s gross domestic product (GDP) to grow more than 4 percent this year, Sri Mulyani said. Under the assumption that the pandemic would last for six months, that global trade would slump by 30 percent and that the country would go into lockdown, economic growth could fall to between zero and 2.5 percent, she added.

Sri Mulyani asked ministries to delay big-check spending to allow more room for fiscal intervention in light of uncertainties surrounding the pandemic this year. The Finance Ministry would move quickly to facilitate other ministries’ spending priorities, she added.

“This will provide us with fiscal space for healthcare and will protect the public and businesspeople.”

As of Sunday, Indonesia had 514 confirmed cases of COVID-19 and 48 deaths. Twenty nine people who contracted the virus have recovered. Globally, the pneumonia-like illness has infected over 308,000 people and has claimed at least 13,000 lives.

University of Indonesia rector Ari Kuncoro said the state budget would need to be flexible to solve health issues and counter the negative economic effects of the virus, adding that the government should substitute the annual budget with an intertemporal budget.

“Desperate times call for desperate measures,” the senior economist told The Jakarta Post. “The government should look to implement an intertemporal budget. If we pass the 3 percent limit this year, then we should compensate for the deficit over the next three to five years.”

The current annual budget system will limit the government’s ability to maneuver nimbly at a time when stimulus is most needed, Ari said. “But the stimulus must focus on healthcare and making the economy work, particularly through online platforms.”

Read also: ‘Desperate times, desperate measures’: Calls grow for flexible state budget amid virus

Indonesia recorded a state budget deficit of Rp 62.8 trillion (US$4.07 billion) in February of this year as government spending growth fell compared to the same period the year before and revenue dropped, the Finance Ministry announced on Wednesday.

Sri Mulyani has said the state budget deficit may widen to between 2.2 and 2.5 percent of GDP this year, taking into account the large government stimulus packages intended to fuel the virus-worn economy.

However, Indonesia's state budget deficit may surpass the established 3 percent ceiling this year as the impacts of the COVID-19 pandemic and a sharp drop in oil prices could further worsen Indonesia’s economic outlook, senior economist Faisal Basri of the Institute for Development of Economics and Finance (INDEF) has warned.

“During the 2008 global financial crisis, the government made several economic decisions. This time, economic policy is blunt to address the virus crisis,” Faisal said.

He urged the government to issue a presidential regulation (Perpres) to allow a deficit of more than 3 percent. He predicted the deficit would increase from the government’s estimate of 1.8 percent of GDP to surpass the ceiling if the situation got worse.

Indonesia has taken several fiscal measures to help the country cope with COVID-19

Measures

Amount

Insurance and compensation for medical workers, including doctors and nurses

Rp 3.1 trillion - Rp 6.1 trillion

Pre-employment cards for a jobseeker training program

Rp 10 trillion

The Family Hope program (PKH) will be expanded from 10 million families to 15 million families to provide a social safety net for about 70 million individuals.

Unknown

A request from the National Disaster Mitigation Agency (BNPB) to step up the fight against the pandemic

Rp 3.3 trillion (under evaluation)

Village funds will be reallocated this year, particularly in COVID-19-affected communities

Rp 72 trillion

State spending reallocation from the 2020 state budget to focus on healthcare, social funds and financial incentives

Rp 62.3 trillion

The first stimulus package, which provides mortgage subsidies for low-income families and fiscal incentives for tourism-related industries

Rp 10.3 trillion

The second stimulus package, which includes individual, import and corporate tax breaks, among others

Rp 22.9 trillion

Incentives for tourism as a part of the first stimulus package will be adjusted to respond to the fast-changing conditions

Rp 3.9 trillion

The budget for official business trips will be significantly reduced

Half of the Rp 43 trillion budget for business trips will be cut

Transfers from the government to villages will be shifted to address COVID-19

Rp 46 trillion - Rp 59 trillion

Source: Finance Ministry compiled by The Jakarta Post


If you want to help in the fight against COVID-19, we have compiled an up-to-date list of community initiatives designed to aid medical workers and low-income people in this article. Link: [UPDATED] Anti-COVID-19 initiatives: Helping Indonesia fight the outbreak