The decision was taken because "tax is down and economic growth is slower, while subsidy is increasing," Finance Minister Chatib Basri said,
Jakarta (ANTARA News) - The Indonesian government had decided to increase the budget deficit from Rp175.4 trillion or 1.69 percent to Rp251.7 trillion or 2.5 percent of the Gross Domestic Product in the revised 2014 national budget.

The decision was taken because "tax is down and economic growth is slower, while subsidy is increasing," Finance Minister Chatib Basri said here on Tuesday.

He added that as part of efforts to maintain the deficit at 2.5 percent, the government will conduct fiscal consolidation by optimizing state income and controlling spending as well as increasing budget financing capacity.

"The deficit is actually a sacrifice to ensure that the next government will not face problems. So, the decision is taken to ensure correct steps are taken during the transitional period," he said.

Current president Susilo Bambang Yudhoyono will step down later this year, following the presidential election scheduled on July 7. He has been in the post for two terms and, therefore, could not seek reelection.

In the draft revised 2014 budget, revenues were set at Rp1,597.7 trillion or down by Rp69.4 trillion from Rp1,667.1 trillion.

State spending, however, increased marginally by Rp6.9 trillion, from Rp1,842.5 to Rp1,849.4 trillion.

Tax revenue in the revised budget was set at Rp1,232.1 trillion, down by Rp48.3 trillion from Rp1.280.4 trillion.

Meanwhile, spending for oil subsidy increased by Rp74.3 trillion to Rp285 trillion, from Rp210.7 trillion.

Electricity subsidy target was Rp107.1 trillion, up Rp35.7 trillion.

Basic macro-economic assumptions for the revised budget include a 5.5 percent economic growth, a 5.3 percent inflation, a rupiah exchange rate of Rp11,700 against the US dollar and a 6.0 percent interest rate for three-month state bonds.

The price of Indonesian Crude Oil, meanwhile, was assumed at US$105 per barrel, while oil lifting was assumed at 818,000 barrels a day and gas at 1,224,000 oil equivalent barrels a day.

Almost all macro-economic assumptions were changed, such as oil lifting, which was set at 818,000 barrels a day from 870,000 barrels a day in the current budget.

This was done because in the first quarter of 2014 oil lifting was estimated to have reached only 797,000 a day, due to bad weather, operational disruptions and a natural decline in production in old wells.(*)

Editor: Heru Purwanto
Copyright © ANTARA 2014