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Indonesia’s budget deficit jumps to $54.1b in October as virus-related debt piles up
As vaccines may only become available in the second half of next year, the pandemic will continue to limit economic recovery, said Institute for Development of Economics and Finance executive director Tauhid Ahmad.
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Finance Minister Sri Mulyani Indrawati delivers remarks after the signing of a memorandum of understanding and a cooperation agreement for the coordination of the acceleration and electronification of regional government transactions at the Office of the Coordinating Economic Minister in Jakarta on Feb. 13. (Antara/M Risyal Hidayat)
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ndonesia’s budget deficit has increased to Rp 764.9 trillion (US$54.11 billion) as of October, with the government borrowing a record amount to bring the economy out of recession and combat a raging coronavirus outbreak.
The epidemic has eroded state revenue and spurred government spending, causing the budget deficit to equal 4.67 percent of GDP. The figure, however, remains within the government’s forecast of a record high 6.34 percent deficit.
“Our fiscal policy will be directed to turn the economic rebound into a sustained and strong economic recovery,” Finance Minister Sri Mulyani Indrawati said on Monday, adding that the government would continue to use the budget to ensure recovery while handling the pandemic.
“We cannot separate COVID-19 cases and economic recovery as the rise in confirmed cases has an adverse impact on the recovery,” she went on to say. “The main task is maintaining economic activity without worsening the outbreak. Therefore, COVID-19 handling is crucial.”
Read also: Indonesia sees 3.8% foreign debt growth in Q3, BI says debt-to-GDP still 'healthy'
Indonesia plunged into recession for the first time in two decades as the economy shrank 3.49 percent in the third quarter after recording 5.32 percent in the second quarter. The government expects the economy to contract 0.6 percent to 1.7 percent this year.
As of October, the government collected only Rp 1.27 quadrillion in state revenue, a 15.4 percent year-on-year (yoy) decline due to falling tax revenue. Tax revenue, the main source of income for the government, fell 18.8 percent yoy to Rp 826.9 trillion because of a sharp fall in import taxes and the implementation of a corporate income tax cut expected to improve economic activity.
