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SBY Sets Expansive 2015 Budget, Shifts Subsidy Issue to Jokowi
By Vanesha Manuturi & Basten Gokkon on 08:52 pm Aug 15, 2014
Jakarta. President Susilo Bambang Yudhoyono, set to step down in October after serving almost a decade in office, is laying out wide budget plans for next year to boost the country’s economy.
Still, the outgoing president, speaking in his last state of the nation address, was reluctant to make an effort to end the nation’s fixation on subsidized fuel. That would leave President-Elect Joko Widodo with the uphill battle of dealing with the subsidy issue in an opposition-dominated legislature to secure funding for his own program.
The government plans to spend a total of Rp 2,020 trillion ($173 billion) in 2015, Yudhoyono said in a speech on Friday. That target is up 7.8 percent from this year’s goal. He delivered the 2015 state budget proposal to the House of Representatives, in an annual ritual before Independence Day, which is on Sunday.
Gross domestic product is forecast to expand 5.6 percent in 2015, from this year’s target of 5.5 percent, Yudhoyono said. The economy grew 5.1 percent in the second quarter, which was the slowest pace in about five years. Revenue is targeted at Rp 1,762 trillion, compared to Rp 1,635 trillion this year.
As a result, this year’s budget deficit would be at Rp 258 trillion, or 2.3 percent of the country’s GDP, narrowing from 2.4 percent of GDP in the 2014 revised budget.
Indonesia is set to allocate up to Rp 433.5 trillion toward all kinds of subsidies in 2015, up 7.6 percent from this year’s revised budget of Rp 403 trillion.
Yudhoyono maintained the energy subsidies — which many economists suggest should be reduced to make room for funding on more critical infrastructure development — saying that cutting the subsidy “is not a popular policy.”
“We realize that the distribution of the fuel subsidy, which is supposed to be enjoyed by lower income-class citizens, has been taken advantaged by people who are economically able. Tackling this, we call for an improvement in efficiency through actions, such as controlling the consumption of subsidized fuel and utilizing population statistics to deliver more effectively,” Yudhoyono said.
Government is set to allocate up to Rp 363.5 trillion in fuel and electricity subsidies, a 4 percent increase from this year.
The figure triples the amount it allocates for infrastructure development in the Public Works and Transportation Ministries.
“The baseline scenario in the budget is giving the incoming government small room for flexibility,” said Purbaya Yudhi Sadewa, head of economic research at Danareksa Research Institute.
“If the deficit is at 2.3 percent [of GDP], there’s barely any room for the incoming government without completely restructuring the budget,” he said, referring to the legal limit that the deficit cannot exceed 3 percent of GDP.
Purbaya also said that the Joko administration’s only option would be to raise the price of subsidized fuel if he wanted to make room for developing infrastructure.
“The current government is washing their hands on the issue and is giving the decision entirely to the next government,” he said.
The Coordinating Minister for the Economy, Chairul Tanjung, said that the draft state budget does not come with specific programs.
“We did that so that the incoming administration will have more room to change and make corrections, in line with their vision and mission,” Chairul said.
Finance Minister M. Chatib Basri said that the incoming administration can be involved in the stipulation of the state budget by pushing for initiatives through their respective factions in the House.
Joko thinks that the allocation for the subsidy budget in the 2015 state budget draft is still too high and needs to be gradually reduced.
“Later [in the next government] of course it will be discussed with all factions. But that’s after the lawsuit process at MK [Constitutional Court] h as been completed. Then, we will deal with it,” Joko said on Friday. The court is set on Aug. 22 to make a decision on rival candidate Prabowo Subianto’s challenge to the presidential election result.
Still, businesses are left unsatisfied with the 2015 budget plan.
“How do you reach 5.6 percent growth when currently you’re at 5.1 percent, and you’re not putting the sufficient investment? For businesses, it’s just still a bit unrealistic,” said Sofjan Wanandi, chairman of the Indonesian Employers Association (Apindo).
“If the subsidy is not trimmed, the budget for development is already lost. How can the budget for subsidy even be bigger than infrastructure? We’re just burying a hole by digging another hole here,” Sofjan said.
Markets reacted negatively to the announcement. The Jakarta Composite Index fell 0.1 percent to 5,148.96 on Friday, with foreign investors selling Rp 1.9 trillion more in shares than they bought. The rupiah weakened to 11,693 per US dollar on Friday from 11,667 on Thursday, Bank Indonesia data show.
Still, the yield on the government’s 10-year bonds slipped to 8.3102 percent on Friday from 8.3185 percent the day before, according to data from the Indonesia Bond Pricing Agency.
Additional reporting by Markus Junianto Sihaloho & Tito Summa Siahaan
SBY Sets Expansive 2015 Budget, Shifts Subsidy Issue to Joko | The Jakarta Globe
By Vanesha Manuturi & Basten Gokkon on 08:52 pm Aug 15, 2014
Jakarta. President Susilo Bambang Yudhoyono, set to step down in October after serving almost a decade in office, is laying out wide budget plans for next year to boost the country’s economy.
Still, the outgoing president, speaking in his last state of the nation address, was reluctant to make an effort to end the nation’s fixation on subsidized fuel. That would leave President-Elect Joko Widodo with the uphill battle of dealing with the subsidy issue in an opposition-dominated legislature to secure funding for his own program.
The government plans to spend a total of Rp 2,020 trillion ($173 billion) in 2015, Yudhoyono said in a speech on Friday. That target is up 7.8 percent from this year’s goal. He delivered the 2015 state budget proposal to the House of Representatives, in an annual ritual before Independence Day, which is on Sunday.
Gross domestic product is forecast to expand 5.6 percent in 2015, from this year’s target of 5.5 percent, Yudhoyono said. The economy grew 5.1 percent in the second quarter, which was the slowest pace in about five years. Revenue is targeted at Rp 1,762 trillion, compared to Rp 1,635 trillion this year.
As a result, this year’s budget deficit would be at Rp 258 trillion, or 2.3 percent of the country’s GDP, narrowing from 2.4 percent of GDP in the 2014 revised budget.
Indonesia is set to allocate up to Rp 433.5 trillion toward all kinds of subsidies in 2015, up 7.6 percent from this year’s revised budget of Rp 403 trillion.
Yudhoyono maintained the energy subsidies — which many economists suggest should be reduced to make room for funding on more critical infrastructure development — saying that cutting the subsidy “is not a popular policy.”
“We realize that the distribution of the fuel subsidy, which is supposed to be enjoyed by lower income-class citizens, has been taken advantaged by people who are economically able. Tackling this, we call for an improvement in efficiency through actions, such as controlling the consumption of subsidized fuel and utilizing population statistics to deliver more effectively,” Yudhoyono said.
Government is set to allocate up to Rp 363.5 trillion in fuel and electricity subsidies, a 4 percent increase from this year.
The figure triples the amount it allocates for infrastructure development in the Public Works and Transportation Ministries.
“The baseline scenario in the budget is giving the incoming government small room for flexibility,” said Purbaya Yudhi Sadewa, head of economic research at Danareksa Research Institute.
“If the deficit is at 2.3 percent [of GDP], there’s barely any room for the incoming government without completely restructuring the budget,” he said, referring to the legal limit that the deficit cannot exceed 3 percent of GDP.
Purbaya also said that the Joko administration’s only option would be to raise the price of subsidized fuel if he wanted to make room for developing infrastructure.
“The current government is washing their hands on the issue and is giving the decision entirely to the next government,” he said.
The Coordinating Minister for the Economy, Chairul Tanjung, said that the draft state budget does not come with specific programs.
“We did that so that the incoming administration will have more room to change and make corrections, in line with their vision and mission,” Chairul said.
Finance Minister M. Chatib Basri said that the incoming administration can be involved in the stipulation of the state budget by pushing for initiatives through their respective factions in the House.
Joko thinks that the allocation for the subsidy budget in the 2015 state budget draft is still too high and needs to be gradually reduced.
“Later [in the next government] of course it will be discussed with all factions. But that’s after the lawsuit process at MK [Constitutional Court] h as been completed. Then, we will deal with it,” Joko said on Friday. The court is set on Aug. 22 to make a decision on rival candidate Prabowo Subianto’s challenge to the presidential election result.
Still, businesses are left unsatisfied with the 2015 budget plan.
“How do you reach 5.6 percent growth when currently you’re at 5.1 percent, and you’re not putting the sufficient investment? For businesses, it’s just still a bit unrealistic,” said Sofjan Wanandi, chairman of the Indonesian Employers Association (Apindo).
“If the subsidy is not trimmed, the budget for development is already lost. How can the budget for subsidy even be bigger than infrastructure? We’re just burying a hole by digging another hole here,” Sofjan said.
Markets reacted negatively to the announcement. The Jakarta Composite Index fell 0.1 percent to 5,148.96 on Friday, with foreign investors selling Rp 1.9 trillion more in shares than they bought. The rupiah weakened to 11,693 per US dollar on Friday from 11,667 on Thursday, Bank Indonesia data show.
Still, the yield on the government’s 10-year bonds slipped to 8.3102 percent on Friday from 8.3185 percent the day before, according to data from the Indonesia Bond Pricing Agency.
Additional reporting by Markus Junianto Sihaloho & Tito Summa Siahaan
SBY Sets Expansive 2015 Budget, Shifts Subsidy Issue to Joko | The Jakarta Globe
