Mardika Parama, Jakarta – The Public Works and Housing (PUPR) Ministry and the Transportation Ministry have had their 2020 budgets slashed by a combined total of Rp 54.8 trillion (US$3.6 billion) as part of the budget reallocation program to finance the government's COVID-19 mitigation effort and economic stimulus, ministers said.
The PUPR Ministry's budget has been reduced by Rp 44.5 trillion from its initial amount of Rp 120.2 trillion, Minister Basuki Hadimuljono said during a virtual hearing with House of Representatives Commission V on May 11.
The budget cut affects a number of the ministry's non-key activities such as official travel and meetings, he said, adding that a number of infrastructure projects that had not been put out for tender, had also been delayed.
At the same event, Transportation Minister Budi Karya Sumadi said the ministry's 2020 budget had been reduced by about Rp 10.3 trillion, or 24.1 percent, to fund the mitigation initiatives. The budget cut affects all directorate generals under the ministry.
"We are refocusing our budget toward projects that have a significant and direct impact on the people. We understand that the spread of COVID-19 is affecting our social and economic condition," he said during the online meeting with lawmakers.
On March 20, Finance Minister Sri Mulyani said the government would reallocate Rp 62.3 trillion of state spending from the 2020 budget to finance COVID-19 mitigation efforts in the health sector and the distribution of social assistance and relief funds for companies affected by the disease.
Sri also asked ministries to delay big-check spending to allow more room for fiscal intervention in light of uncertainties surrounding the outbreak this year.
With the budget cut, both the PUPR Ministry and Transportation Ministry will have to tighten their spending on projects that are deemed nonessential. The ministries will also carry out more labor-intensive projects to help people who have lost their livelihood as a result of COVID-19.
The PUPR Ministry has postponed the bidding process for Rp 7.8 trillion worth of contract packages for infrastructure development that were initially scheduled to be held in 2020.
The delayed projects include an irrigation rehabilitation project in Pidie regency in Aceh, the construction of the Sp. Tohpati – Tjokroaminoto bridge in Denpasar, Bali and waterfront renovation project in Pariaman, West Sumatra.
The ministry has also converted Rp 14.6 trillion worth of single-year contract (SYC) packages into multi-year contract (MYC), which enables the government to extend one-year construction projects and disburse its payment in the following years.
In addition, the PUPR Ministry has also allocated Rp 1.8 trillion to fund COVID-19 mitigation programs and labor intensive projects.
"A total of Rp 1.8 trillion in reallocated funds is used to construct emergency hospitals, procure pandemic mitigation necessities for all 44,000 PUPR Ministry employees, and to fund labor intensive programs in all 34 provinces," Basuki said.
He added that the labor intensive projects would be initiated in 2,865 locations, and were expected to employ 78,000 people for around 30 to 100 days.
Similar to the PUPR Ministry's initiatives, the Transportation Ministry has also cut down on spending for all directorate generals to raise about Rp 5.9 trillion for labor-intensive projects.
The ministry's Railways Directorate General booked the largest cut with Rp 4.7 trillion taken from its initial budget, followed by the Air Transportation Directorate General with a Rp 2.1 trillion cut and sea transportation with a Rp 1.9 trillion cut.
"The Railways Directorate General has had the largest budget cut because it has issued a series of Sharia sovereign bonds (SBSN) that we could extend over multiple years," Budi said.
The ministry has also extended Rp 2.7 trillion worth of MYC projects and delayed Rp 4.7 trillion worth of projects and programs as part of the budget reallocation program, the minister added.
Besides cutting down on spending, President Joko "Jokowi" Widodo also issued a regulation in lieu of law (Perppu) on March 31 that would enable the government to widen the state budget deficit threshold to about 5 percent of GDP from 3 percent at present. With the higher threshold, the government has more room to raise debts to finance the budget.
The government has allocated extra spending of Rp 405.1 trillion for the handling of the COVID-19 pandemic. Of the total funds, about Rp 75 trillion will be spent on the health sector, Rp 110 trillion on social protection, Rp 70 trillion on tax incentives and Rp 150 trillion on the economic recovery program.