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Belt-tightening key theme of 2022 budget
The government is trying to whittle spending while growing revenue to reinstate the 3 percent state budget deficit by 2023 as required by law, though it remains to be seen if the planned changes to the 2022 PEN budget will burn the candle at both ends.
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Finance Minister Sri Mulyani briefs members of the press on the planned 2022 state budget at the ministry on Aug. 18, 2021. (Finance Ministry/Public relation team)
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he government’s budget plan foresees a much narrower deficit next year as the country embarks on a path of fiscal consolidation with an aim to push the deficit back below 3 percent of GDP in 2023.
Finance Minister Sri Mulyani Indrawati told reporters on Monday that the deficit would be no more than 4.85 percent in 2022, much lower than in both 2021 and 2020, when the deficit was respectively 5.82 percent and 6.14 percent. The 2022 deficit plan equals a gap of Rp 868 trillion (US$51 billion) between state revenue and state expenditure.
Acknowledging that the planned reduction in the state deficit was ambitious, Sri Mulyani explained that the government would steady its spending while betting on a higher income on expectations that the economy would improve significantly next year.
“Our deficit will be Rp 868 trillion next year, much lower than [this year]. This points to fairly sharp consolidation in 2022,” she told a press briefing at the ministry.
The minister added that Law No. 2/2020 on state financial policy and system stability for COVID-19 handling only permitted the government to exceed the budget deficit cap for a maximum of three years.
This means that, following the excessive deficits in 2020, 2021 and 2022, the deficit cap must return to below 3 percent of GDP in 2023.
