Saturday, May 11, 2013

Indonesia's Budget Deficit May Widen to 2.5% of GDP

Indonesia's budget deficit this year may widen from 1.65% of gross domestic product -- as set in the state budget-- to around 2.5% following the upcoming government's plan to raise fuel price probably at IDR 6,000 a liter.

The 1.65% of deficit is equal with IDR 154 trillion.

Currently, the price of subsidized fuel subsidy is IDR 4,500 a liter.

To help finance the rising deficit, according to Head of Fiscal Policy Agency Bambang Brodjonegoro, the government is preparing some alternatives, respectively trimming the expenditure allocation of ministries and government bodies and adding the issuance of the government's bonds.

 He refused to say how much the budget for ministries and government bodies may get cut this time.

On additional debt issuance, Bambang said, "If we issue too much, it's not easy for market to absorb it. Besides, we may be worried the cost we must pay will not be quite optimal."
He remains optimistic bond market would still welcome Indonesia's debt issuance despite the downgrading outlook done by Standard & Poor's last week.

The new figure of budget deficit will be one of the issues in the revised state budget and it will go through a deliberation with the House immediately.

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