The government’s initial target was for a deficit of 2.29% for 2024, wider than 2023’s deficit of 1.65%.
The rupiah hit 16,475 per U.S. dollar last month, its weakest in four years, due to a strong dollar and on concern about the spending plans of the incoming government. It has weakened by around 6.3% in the first half of the year.
Spending on fuel subsidies has increased due to the weaker rupiah and the government has also spent more on food assistance, while tax revenue has been affected by moderating commodity prices, Finance Minister Sri Mulyani Indrawati said, resulting in a wider deficit estimate.
However, Sri Mulyani said the government will remain vigilant in its debt management and will optimise the use of its excess cash from last year’s budget of 100 trillion rupiah ($6.15 billion) to reduce debt issuance.
“Hopefully this will help maintain macroeconomic stability, especially the exchange rate movements and government bond yields,” she told the parliamentary budget committee.
The government said it could issue 214.6 trillion rupiah less in debt this year.
FISCAL DEFICIT
In the first six months of 2024, the government posted a fiscal deficit of 0.34%, data presented at the hearing showed, as revenue dropped 6.2% compared with the same period last year, largely due to shrinking tax revenues.
Sri Mulyani said that mining-related companies have been asking for an earlier refund for their tax overpayments, as they need more liquidity to weather low global demand.
Tax revenue is forecast to fall 4 percentage points short of the government’s target to 2,218.4 trillion rupiah by year-end, though total revenue is expected to hit target.
However, it will not be enough to compensate for higher spending this year, which is expected to be 3,412.2 trillion rupiah, or 2.6 percentage points, higher than target.
“We hope with the current global uncertainties, all government programmes can still be executed in the second half to support economic growth,” she said adding that the economy is expected to expand in a range of 5% to 5.2% in 2024.
Said Abdullah, the committee chair, warned the government about the risk of lower tax revenue this year and suggested that it put on hold projects that had a smaller impact on economic growth.
($1 = 16,265.0000 rupiah)
Source: Economy - investing.com
