Wednesday, 8 August 2012


One of the biggest problem faced by the Government today was keep ratio of budget deficit within safe and healthy corridor in this case the Government was determined to maintain ration of budget deficit in the range of 2.3% - 2.4% of GDP. This range was still below 3% as safe level as agreed by OECD (Organization of Economic and Cooperation Development).

The Minister of Finance Agus Martowardoyo who represented the Government would take extra measures to keep budget deficit from swelling for example by not drawing stand by loan because it would be used for covering budget deficit.

So far commitment to stand by loan received by the Government came to USD 5 billion broken down as follows Japan Bank for international Cooperation (JBIC) USD 1.5 billion, the World Bank USD 2 billion, Asian Development Bank (ADB) USD 500 million and Australia USD 1 billion.

In addition to that the Government also had additional fund and reserve fund to cover up budget deficit. In the State Budget revised version (APBN-P) 2012 allocation for reserve fund for energy risk was Rp 23 trillion.

Prognoses of the Ministry of Finance had it that realization of state’s income and grant this year came to Rp 1,362,40 or 0.31% higher than APBNP 2012 estimated at Rp 1,358.20 trillion.

State’s expenditure was estimated at Rp 1,548 trillion or 0.32% lower than the targeted Rp 1,553.20 trillion. This year’s budget was predicted to suffer deficit of Rp 190.80 trillion or 2.3% of GDP, higher than the targeted 2.23%.

In line with efficiency measure to be done by the Government, in fact employees expenditure could be saved up to 30% of total budget which was stipulated after calculating all salaries and remuneration. Total employees expenditure was only 70% of budget stipulated by the Government. This figure was inclusive of salary increase, benefits and remuneration.

Therefore, most probably the Government would reduce over budgeted spending. Reduction of expenditure was not focused on fixed expenditure like salary and benefits, but on supportive expenditures which was merely ceremonial.

 Furthermore increased employee’s salary was more benefited by high raking employee instead of law employees and therefore not contributive to promoting economic growth because it did not lift up people’s purchasing power.

Beyond employees expenses, expenditure for goods could still, such as travel expenses and procurement of equipments and office stationeries. Travel expenses could be slashed more since many of them were not important, for executives or legislatives.

However, it was noteworthy that capital expenditure would have its negative impact on Indonesia’s economic growth. For that matter the Government must find solution so absorption of capital spending which had not been too good could run better. The objective was that capital spending might serve as uplifter of economic activities so growth might reach 6.3% to 6.5% this year.

Capital expenditure would be included in investment budget. Slashing of capital expenditures would but stagnate economic growth at around 6.0%-6.3%. The point was that Government spending must serve as stimulus to national economy amidst lowered export performance and investments.

Prognoses of the Ministry of Finance had it that realization of employees expenditure till end of this year was Rp 206.3 trillion or 97.2% of assumption of State Budget 2012 at Rp 213.3 trillion. Meanwhile realization of goods expenditure was estimated at Rp 170 trillion or 91.1% of the targeted Rp 186.6 trillion, capital spending was Rp 153.4 trillion or 90.9% of the targeted Rp 168.7 trillion. Total expenditure for subsidy was estimated at Rp 346.9 trillion or 141.6% of the targeter at Rp 346.9 trillion or 141.6% of the targeted Rp 245.1 trillion. 

In addition to other expenditures, total Government’s expending this year was estimated at Rp 1,070.80 trillion or 100.1% of Government’s spending was only 0.1% above target, although subsidy was estimated at 41.6% higher than target. This was because the Government had re-allocated budgets. It would be justifiable for the Government to re-allocate spending based on need, as long as the spirit to propel economic growth remained there.

Even in the extreme case assuming the Government were willing, they could run austerity plan in all expenditure posts based on priority scale. Admittedly without increasing price of subsidized oil it was kind of hard for the Government to manage state budget effectively. 

About budget for the educational sector which was allocated at 20% of APBN Budget, the utilization could be maximized including for educational infra-structures like school building, laboratories, sports venues and workshop for training and educational and training centers (diklat) for departments or ministries. Hence physical infra structure building in the educational sector might lessen burden of infra structure financing as a whole.   

Business News, WEDNESDAY - July 18, 2012    

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