ASEAN KEY DESTINATIONS
Govt to cut spending, just not on infrastructure
Indonesia:The government is seeking to maintain infrastructure funding at current levels while trimming other sectors’ funding amid a cash-strapped budget in a measure lauded by analysts.
Coordinating Economic Minister Darmin Nasution said on Monday at the State Palace that the government had to step up efficiency measures when revising the 2016 state budget.
The revision will be crucial to the government’s attempt to achieve its economic targets despite a bleak outlook for expected revenue due to low tax income and slumping oil prices, which are expected to drag down other commodity prices also and reduce non-tax income.
The state budget shows that total state revenue is earmarked at Rp 1.82 quadrillion (US$135.4 billion) in 2016, 21 percent more than last year’s realized total. “However, if revenue decreases, spending must decrease as well,” Darmin said.
Total state spending in 2016, on the other hand, has been set at Rp 2.09 quadrillion, 63.2 percent of which belongs to the central administration.
Specifically, 37 percent of the spending is going to ministries and agencies, with Public Works and Public Housing Ministry receiving the largest allocation of Rp 104.1 trillion. Meanwhile, 37 percent of the spending is dedicated to the regions and village funds and the remaining 26 percent is for non-ministries and agencies.
The government might have to shave off over Rp 290 trillion in funding from ministries and agencies in the upcoming budget revision, said Darmin and Sofjan Wanandi, the chief economic advisor to Vice President Jusuf Kalla.
Most of the cuts will likely come from routine expenditure whereas capital and goods expenditure — especially that relating to infrastructure projects — will likely remain as is.
“The government will continue playing its role as locomotive for the economy and for infrastructure development, but the private
sector must be involved for other developments because our budget is limited,” Sofjan said, adding that the government’s 5.3 percent growth target was still feasible despite the cuts.
He also said that each ministry’s budget allocation would be carefully examined to remove spending items deemed “inefficient”, a move previously called upon by President Joko “Jokowi” Widodo.
In a plenary Cabinet meeting two weeks ago, the President insisted that ministries’ spending be in line with the administration’s list of priorities and that ministers had to hold back from channeling funds into non-priority projects.
Contacted separately, Finance Minister Bambang Brodjonegoro said that the ministry had not made any decision and that it was still reviewing the latest development.
Meanwhile, Bank Central Asia (BCA) chief economist David Sumual and Center for Indonesia Taxation Analysis (CITA) executive director Yustinus Prastowo welcomed the spending cuts, saying that it would be better for the government to play things conservatively because tax income had not progressed as expected.
The January data on total tax income showed even lower results than a year ago, down 8.8 percent year-on-year at Rp 62.25 trillion.
Yustinus said that potential income from the highly awaited Tax Amnesty Law could not be realized soon because talks were still ongoing at the House of Representatives.
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