Jakarta: Finance Minister Sri Mulyani Indrawati has forecast that Indonesia’s 2020 state budget deficit will potentially widen in the face of the current global uncertainty.
"If the economy declines and tax receipts weaken, we must prepare ourselves to raise the deficit," she stated at Hotel Ritz-Carlton in Jakarta on Wednesday, February 26, 2020.
The former World Bank managing director was unaware of the extent to which the deficit will be raised since she had yet to gauge the condition ahead along with various factors in order to set it.
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"We will first look at its calculation combined with various factors. However, we have taken precautionary measures against it since in the 2020 state budget law, it has been set at 1.76 percent of the GDP. That is conservative enough," she remarked.
According to her, when the Indonesian economy weakens, the government will unlikely tighten its policies. Hence, it will offer stimuli to enable the smooth running of the Indonesian economy.
"If the government tightens its belt, what will happen is a procyclical condition or a weak economy, and we cut all expenditures, our economy will nosedive," she stated.
"There must be countercyclical policy. If the economy weakens, I must not be weak and I must free it," she added.
To offset the widening budget, the government will issue new debt securities due in three decades, with an interest rate of three percent, among others, she remarked.
"The deficit will be financed from financing. Today, we can issue 30-year bonds, with an interest rate below three percent. Since now it is February, we will look ahead whether it will be wider than expected in the 2020 state budget law," she noted. (Antara)