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Reform, vaccination needed as state budget not enough to boost recovery: Sri Mulyani
Indonesia’s budget deficit soared to a record Rp 956.3 trillion (US$69.07 billion) last year as the coronavirus pandemic fueled enormous government spending while tax revenue plunged.
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Finance Minister Sri Mulyani Indrawati gestures during a press briefing on the 2020 state budget realization in Jakarta on Feb, 19, 2020. (Antara/Puspa Perwitasari)
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ndonesia’s economic recovery should not only depend on government spending as it will not be sufficient to compensate for the slowing economic activity caused by the coronavirus pandemic, a minister said Wednesday, as the 2020 fiscal deficit reached a record high.
Finance Minister Sri Mulyani Indrawati highlighted the extraordinary level of money that had been poured into the economy last year to anchor business activity and combat the virus, warning that the state budget had a limitation and could not act alone in rescuing the economy.
“We realize that economic recovery should not and will not only depend on the state budget, as it will not be enough to compensate for [falls in] consumption, investment and export activity,” she said in a press briefing on Monday. “We need reform to attract investment […] and mass vaccination to build confidence that will speed up domestic consumption recovery.”
Indonesia’s budget deficit soared to a record Rp 956.3 trillion (US$69.07 billion) last year as the coronavirus pandemic fueled enormous government spending while tax revenue plunged as households and businesses struggled with the pandemic-induced economic downturn.
The deficit, which is equal to 6.09 percent of the country’s gross domestic product (GDP), underscores economic challenges faced by Indonesia as it tries to emerge from its first recession since the 1998 Asian financial crisis. The figure is also nearly three times as large as the Rp 348.7 trillion deficit in the 2019 fiscal year.
The government issued a government regulation in lieu of law early last year, which was approved into law by the House of Representatives later in the year, to enable the state budget deficit to widen beyond the previous legal limit of 3 percent of GDP as a response to the outbreak. It aims to bring the deficit cap back to 3 percent in 2023.
“The state budget will continue to support economic recovery but we will look to maintain the health of the budget going forward,” Sri Mulyani stressed. “Therefore, the plan to reduce the extraordinary fiscal spending must be prepared thoroughly in 2021 and 2022.”
