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Need Rp700 trillion revenue to keep budget deficit below 3 percent: INDEF

Tempo - October 7, 2021

Antara, Jakarta – The government will require additional revenue of up to Rp700 trillion to keep the state budget deficit below three percent of the GDP (gross domestic product), the Institute for Development of Economics and Finance (Indef) said.

"By 2023, we need around Rp600 to Rp700 trillion. Without additional government revenue, especially tax, the deficit target would be very difficult to achieve," Indef executive director Tauhid Ahmad remarked during an online discussion observed from here on Wednesday.

The government is facing difficulty in reducing the state budget deficit to below three percent of the GDP because the state's income has not fully recovered, he observed.

This is due to the fact that only a handful of economic sectors have recovered from the impact of COVID-19, he explained.

To return the state budget deficit to below three percent of GDP, the government should recover the manufacturing and trade industry, which has significantly contributed to tax revenue all this time, he argued.

In addition, public consumption should also be boosted so that the government can get additional income from value-added tax based on people's consumption, he said.

"I believe that there is a potential that the deficit will increase. Unless the government is willing to drastically reduce the spending on economic recovery," Ahmad remarked.

He warned that if the government is unable to obtain an additional income of Rp600-Rp700 trillion, then the state budget deficit can potentially exceed three percent of the GDP by 2023.

This projection of state budget deficit exceeding three percent of the GDP is based on what is currently happening in terms of the performance of government's income and taxation, he remarked.

Source: https://en.tempo.co/read/1514614/need-rp700-trillion-revenue-to-keep-budget-deficit-below-3-percent-inde