Tuesday, 30 July 2013


The posture of RAPBN-P 2013 state budget was rated as being lack of fiscal stimuli considering that some productive sectors like industry and agriculture did not get any reasonable incentive or subsidy. RAPBN-P which was designed to be at deficit of 2.48% was ironically used to finance subsidy which swelled fro Rp317.2 trillion to Rp358.2 trillion.
Thirty percent of the subsidy fund was taken from the Central government’s budget. Surprisingly capital expenditure as fiscal stimulus dropped from 16% to 15.7%. And yet amidst downturning export and pressures and deficit of trade balance productive fiscal stimulus was needed for strengthening of domestic economic capacity especially in the productive sectors which accommodated labor.
In RAPBN-P 2013 the government allocated fund for energy subsidy amounting to Rp309.9 trillion, consisting of fuel subsidy and LPG Rp209.92 trillion and subsidy for electricity Rp99.98 trillion, subsidy for seed Rp1.45 trillion, Public Service Obligation [PSO] Rp1.52 trillion, subsidy for program credit interest Rp1.25 trillion and tax subsidy Rp4.64 trillion.
In tandem with the above, debt was piling up in APBN-P 2013. New debt in the form of State Promissory Note [SBN] gross was posted at Rp341.4 trillion. And yet the position of government’s outstanding debt of 2013 came to Rp2,023.72 trillion. Indonesia’s debt-to-GDP ratio was claimed to drop, but was no guarantee to sustainability of development considering that the nominal figure of debt constantly increased each year.
Only trouble was that the nation’s nasty habit relapsed again, i.e. slow absorption of budget all year through. Low realization of the Central Government’s debt till end of May 2013 made it difficult for the Government to realize their commitment to jack up economic development through Government’s financing. Data of the Directorate General of Treasure, Ministry of Finance had it that realization of expenditure of the Central Government as per May 31, 2013 was only posted at 27.5% or Rp317.3 trillion of the Rp1,154.4 trillion ceiling.
Expenditure of Government’s expenditure by end of May 2013 made it difficult for the government to realize their commitment to spur on economic development of 2013 to the level of 6.3%, the portion of government expenditure should be at least 10% of GDP. In fact the government should have maximized their expenditure since quarter II this year.
Many circles were pessimistic about government ability in realizing budget absorption at above 94% as promised by Finance Minister M Chatib Basri. Moreover revision of the Budget Form-filling [DIPA] in the process of APBN-P 2013 state budget had slowed down budget execution. The revision stagnated the process, so administrative and coordination problem as such must be overcome although many circles were pessimistic about the present condition.
Maximum budget absorption in quarter II and III had given maximum drive to economic growth, while improving the budget expenditure structures which tend to pile up by last quarter of the year. Meanwhile budget absorption in quarter IV tend to generate impact in the next year.
Furthermore budget performance of capital expenditure and goods buying’s brought greater impaction economic growth rate. Unfortunately, realization of goods expenditure by end of May was only recorded at 16.2% or Rp32.6 trillion of the Rp200.7 trillion ceiling. Worse performance was even shown by capital expenditure with realization of only 13.8% or Rp25.4 trillion of the Rp184.4 trillion ceiling.
On the other hand, greatest realization was contributed by employee’s salary expenditure and debt payment obligation. Wages expenditure by end of May was recorded at Rp88.8 trillion or 36.8% of ceiling. Subsidy expenditure had come to Rp109.7 trillion or 34.6% of ceiling, while debt payment obligation had reached Rp43.9 trillion or 38.7% of ceiling.
As if responding to public criticism, Finance Minister Chatib said that the Ministry of Finance planned to simplify the procedure of budget liquidating of ministries and institutions, for example by eliminating some administrative requirement form without ignoring the principles of good governance. As planned the Minister also planned to increase budget absorption target to 94%. The government also planned to axe budget expenditure posts which were less productive to minimize deficit of primary balance sheet. This was necessary to keep the government from being rated as being unable to pay debts in the future.
Moreover deficit in primary balance sheet must be anticipated by the government, as it might create negative image in terms of fiscal management. Therefore, while trying to increase income, axing of budget other than subsidy was necessary. The Government was also expected to edge aside political pressures to carry out the task. Budgetary posts which could be reduced were also quite numerous, among them was energy subsidy which was off target; the same was with expenditure posts in Ministries and institutions.
Just to remind, leaking or deviations of budget by ministries and institutions [K/L] was detected by the posted at Rp72 trillion. To review budget over the posted at Rp72 trillion. To review budget over the past 3 years, primary trade balance had been constantly posting deficit. It was the Government’s mission to try to bring back surplus.
Such was felt necessary because it was one of the instruments which could enable the Government to pay debt. Primary balanced sheet which had always been in deficit was mostly on account of budget execution not being maximized. The government was recommended to review the niches which could be improved and which would not affect fiscal policy design. One thing was sure primary balancing must be maintained to be positive and surplus for the future.
As reporter the Government was striving to keep budgetary deficit of next year not to be as big as this year. However such would depend on deficit in Government’s budget. If deficit was maintained at 1.2% primary balance might lead to 0%. To attain such, it depended on the Government’s future expenditure pattern. The point was that the criteria for improving primary balance was by increasing income and maximizing expenditure; hopefully by the government’s policy of subsidized fuel, expenditure could be well managed
The issuance of State’s Promissory Notes [SBN] by the Government to cover up deficit could not be constantly relied on. While it was unsafe for long run, it was also an unpopular act by the Government. Because the income post, through tax or other means was till hard to jack up, so the pressing need now was efficiency. In the event that the government had axed ministrial budget and reduced subsidy for oil, now that needed to be done was to maximize budget expenditure.
In the APBN-P 2013, total primary balance was having deficit allocated Rp120.8 trillion or triple the amount of APBN 2013 at around Rp40.1 trillion. The government must be cautious of twin deficit, i.e. deficit in state budget and deficit in trade balance. In case of state budget, one of the solutions was to increase fuel price. Every Ministry and institutions were in the process of dissecting the matter with the related commission of House, the target was Rp26 trillion without affecting output and outcome.
To increase price of subsidized oil could also be useful for pressing deficit. This was so far because deficit in trade balance was on account of oil gas expenses which deducted was on account of oil and gas expenses which deducted surplus. Fortunately investment was still sound and this must not be distributed. Therefore it was recommended that the Government could issues a policy package to maintain good investment such as tax holiday. (SS)              

Business News - July 19,2013

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