JAKARTA: Indonesia’s government is not in discussions that could allow the country’s fiscal deficit to go beyond the current legal limit of 3% of gross domestic product (GDP), a senior finance ministry official said on Dec 11.
Finance Minister Sri Mulyani Indrawati had earlier said such a move was being discussed by President Joko Widodo and cabinet ministers but Askolani, the ministry’s director-general of budgeting, said: ‘The (finance) minister has clarified that is not correct.
“The government is still following the mandate of the State Finances Law regarding the state budget deficit limit and the debt ratio.”
Askolani was referring to a 2003 law stipulating that the budget deficit in a fiscal year cannot be more than 3% of GDP and total public debt cannot breach a limit of 60% of GDP.
The limits were introduced in the aftermath of the Asian financial crisis in the late 1990s to avoid excess borrowing.
This year, weak tax income collection is set to push the fiscal deficit to 2.2% of GDP, compared to an initial forecast of 1.84%, according to the latest estimate by finance ministry officials.
Some economists have criticised Indrawati for her conservative fiscal policy at a time when economic growth is slowing. Indrawati has projected a fiscal deficit of 1.76% of GDP in 2020. – Reuters
