APSN Banner

Indonesia proposes $188 bln 2022 budget with shrinking fiscal deficit

Reuters - August 16, 2021

Tabita Diela, Gayatri Suroyo, Jakarta – Indonesia's President Joko Widodo on Monday proposed a $188 billion budget for 2022, a touch bigger than this year's spending outlook and with a narrowing fiscal deficit, as he set higher growth targets despite a resurgence of COVID-19 cases.

In his annual budget speech at parliament, Jokowi, as the president is popularly known, said next year's budget theme will be to accelerate the economic recovery from the COVID-19 pandemic and strengthen structural reforms, with controlling the coronavirus outbreak still a main focus.

The 2022 budget proposal, amounting to 2,708.7 trillion rupiah ($188.30 billion), was about 0.4% bigger than the 2,697.2 trillion rupiah the government expected to spend this year.

The 2022 economic growth target was set in a range of 5% to 5.5%, up from 2021's estimate of 3.7% to 4.5%.

"We will utilise all resources... to control the pandemic. Therefore, the economic recovery and social welfare can be maintained, continue to be accelerated and strengthened," Jokowi said.

The proposal called for a budget deficit of 4.85% of GDP, compared with this year's revised deficit forecast of 5.82%.

The president said this meant the 2022 budget would serve as a foundation to bring fiscal deficit down to under 3% in 2023 here to comply with current laws on the fiscal gap and debt ceiling.

Southeast Asia's largest economy pulled out of recession here in the second quarter with a 7% annual GDP growth, but analysts warn the recovery faces a setback due to a resurgence in COVID-19 cases and mobility restrictions since early July.

The economy contracted for the first time since 1998 last year, by 2.1%.

The president proposed 255.3 trillion rupiah for health spending next year, including for improving testing, tracing and treatment of COVID-19 cases and vaccination.

The proposal also included 427.5 trillion rupiah allocation for welfare programmes and 384.8 trillion rupiah for infrastructure.

Jokowi targeted a 6% increase in revenues next year. He did not mention any specific tax measures in the speech, despite a separate, ongoing debate in parliament on proposals to raise the value added tax rate and introduce a carbon tax.

To fund the 2022 deficit, the government has proposed 991.3 trillion rupiah worth of bond issuance, excluding for refinancing, buybacks and short-term treasury notes.

Parliament is expected to vote on the budget in late September or early October.

[Additional reporting by Fransiska Nangoy and Stanley Widianto; Editing by Lincoln Feast.]

Source: https://www.reuters.com/article/indonesia-politics-economy-budget/update-1-indonesia-proposes-188-bln-2022-budget-with-shrinking-fiscal-deficit-idUSL4N2PK19