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View all search resultsTrust is the currency of fiscal policy
We won’t know until January, but we are probably looking at the highest fiscal deficit in decades.
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President Prabowo Subianto delivers a speech on Dec. 24 during a ceremony for the handover of funds collected from forestry administrative fines and recovered state assets from corruption cases at the Attorney General’s Office complex in Jakarta. (Antara/Aditya Pradana Putra)
T
he budget deficit looks set to rise substantially this year because of poor revenue collection, but the government has sought to allay any concern that the shortfall could breach the legal cap set at 3 percent of gross domestic product (GDP).
Finance Minister Purbaya Yudhi Sadewa admitted earlier this month that the deficit may exceed the 2.78 percent of GDP stipulated in the 2025 budget plan, which points to a marked increase from the 2.29 percent logged in 2024.
The final figure may be too close for comfort to the 3 percent limit.
We will not know until January, but we are probably looking at the highest fiscal deficit in decades, when excluding the coronavirus pandemic years, during which the cap was temporarily lifted to allow for extra public spending in light of the health emergency.
The administration of President Prabowo Subianto had hoped to boost economic activity and as a result collect more state income even without hiking the rates of taxes, excise or nontax revenue sources.
But GDP growth has remained stubbornly near 5 percent, a level that has become the de-facto benchmark for the archipelago’s economy.
Even more than Rp 270 trillion(US$16.12 billion) in state funds moved from Bank Indonesia to commercial banks since the new finance minister took the reins in September has failed, so far at least, to stoke credit growth.
