Deputy Finance Minister Suahasil Nazara said the government had financed the budget with Rp 231.6 trillion (US$15.73 billion) in government bonds as of April this year, a jump of 44.3 percent compared to the same period last year.

“This is bigger not only because of the widening deficit but also to ensure the availability of funds for COVID-19 mitigation, including for healthcare spending, social spending and funds for businesses,” Suahasil told reporters in a streamed media briefing on Wednesday.

The government had sold Rp 376.5 trillion worth of government bonds as of April and plans to issue another Rp 697.3 trillion from May until the end of this year.

However, the Finance Ministry’s director general for financing and risk management Luky Alfirman estimated that the ministry would issue an additional Rp 175 trillion worth of bonds following a plan to revise assumptions underpinning the 2020 budget.

The government now expects the budget deficit to reach Rp 1.02 quadrillion, or 6.27 percent of gross domestic product (GDP) this year, rising from the initial estimate of 5.07 percent of GDP, as President Joko “Jokowi” Widodo ramps up economic recovery stimulus to Rp 641.7 trillion to counter the virus blow.

It also plans to issue samurai bonds later this year to help cover the widening deficit after offering $4.3 billion in dollar-denominated bonds in early April, including the longest-dated 50-year tranche.

“Samurai bonds are in the pipeline and we will always be opportunistic in issuing global bonds,” Luky told reporters. “We will look at market conditions to get the best prices.”

The Finance Ministry recorded a budget deficit of Rp 74.5 trillion, or 0.44 percent of GDP, as of April this year as state revenue grew while state spending shrank. It looks small as not all the funds allocated for COVID-19 mitigation and economic recovery programs have been realized.

State revenue stood at Rp 549.5 trillion as of April this year, up 3.2 percent, driven by nontax income and income from tobacco excise, while income from taxes dropped.

Ministry data on Wednesday revealed that tax revenue had contracted 3.1 percent to Rp 548.8 trillion, mainly driven by weakening oil and gas tax collection following a slump in commodity prices, as well as driven by a drop in trade and mining industries.

Meanwhile, state spending had reached Rp 624 trillion as of April, or down 1.4 percent from the same period last year, as central government spending grew 3.4 percent to Rp 382.5 trillion as capital and social spending increased despite a contraction of 8 percent in direct regional transfers to Rp 241.7 trillion.

The government is rolling out a Rp 641.17 trillion economic recovery stimulus package, bigger than previous allocations, to soften the impact of COVID-19 on micro, small and medium enterprises (MSMEs), as well as state-owned enterprises (SOEs).

The coronavirus pandemic has infected more than 19,000 individuals across the country and killed more than 1,200, as well as hitting the country’s economy and triggering massive layoffs. The country’s economy grew 2.97 percent as household spending growth slowed.

Meanwhile, researchers at the Center for Indonesia Taxation Analysis said the government should not make further sudden changes to the state budget in the near-term, adding the move would confuse businesses and threaten fiscal credibility.

"The government should use all of its resources to maximize the [economic] potential," the researchers said in a statement. "However, they must not be careless despite a widening budget deficit. We do not want to fall into an unwanted economic situation."

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