Indonesia’s budget deficit narrows sharply amid strong revenues

INDONESIA’S fiscal deficit as of Dec 14 was equal to 1.22 per cent of gross domestic product (GDP), much smaller than the latest government outlook, the finance minister said on Tuesday (Dec 20), amid strong revenue collection and good budget discipline.

The data was hailed by some analysts as good fiscal management, after the government recorded large deficits in 2021 and 2020 to help South-east Asia’s largest economy navigate the impact of the Covid-19 pandemic.

Indonesia booked a fiscal deficit of 237.7 trillion rupiah (S$20.6 billion) or 1.22 per cent of GDP as of mid-December, Sri Mulyani Indrawati told an online news conference.

That was much narrower than the revised budget deficit for full-year 2022 of 4.5 per cent of GDP and officials’ latest guidance of a deficit of around 3 per cent this year.

Last year’s fiscal deficit was 4.6 per cent, while 2020’s was 6.1 per cent.

“The deficit was much smaller than what we planned for,” Sri Mulyani said, without providing a full-year estimate.

“This shows that our budget has become healthier.”

Total revenue in the same period was 2,479.9 trillion rupiah, up 37 per cent from last year and higher than the target for 2022, boosted by high commodity prices, economic recovery from the pandemic and a hike in the value added tax (VAT) rate.

Total spending amounted to 2,717.6 trillion rupiah, up 12 per cent from 2021, but representing just 87.5 per cent of the year’s budget.

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Spending is expected to rise in the last few days of 2022, with some fuel subsidies and bills for projects like construction for the planned new capital city yet to be paid, said the ministry’s director general of budget Isa Rachmatarwata.

The government had excess cash of 232.2 trillion rupiah as of Dec 14. Officials have previously said this could be carried over to next year to lower the 2023 bond sale target.

Fakhrul Fulvian, an economist with brokerage Trimegah Sekuritas in Jakarta, said the small deficit reflected a commitment for fiscal discipline.

Handy Yunianto, head of fixed income at Mandiri Sekuritas, said: “This should be positive for the bond market and sovereign ratings”. REUTERS