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Indonesia budget deficit won't go beyond 2.2%: finance minister

[JAKARTA] Indonesia's government will not allow this year's budget deficit to widen to more than 2.2 per cent of gross domestic product, the finance minister said on Thursday.

The government's deficit target of 1.9 per cent this year is dependent on total revenue increasing by 14 per cent and tax collection by 30 per cent, a scenario that the World Bank has warned was unrealistic. "The most important thing is to make sure the budget is safe. Even if the deficit has to widen, we will keep the size at no more than last year's deficit of 2.2 per cent," Finance Minister Bambang Brodjonegoro told reporters at an economic conference.

The minister said obtaining a 30 per cent increase in tax collection will be "very challenging, but still achievable".

As of April, tax collection, excluding excise and export-import duty, has only reached 24 per cent of the target for 2015.

Tax revenue reached 310.1 trillion rupiah (S$31.52 billion) in the first four months, down 1 per cent from the same period last year.

If the target is not met, Mr Brodjonegoro said the government had "some measures in place to deal with the worst" but that did not include cutting spending this early in the year.

Lowering the budget deficit is crucial for Southeast Asia's largest economy as Indonesian interest rates could be forced higher, raising the government's borrowing costs, should US interest rates rise, as expected, later this year.

REUTERS