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Economy

Indonesia's deficit widens in 2017 budget revision

Tax collection is lower post amnesty program

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Indonesian President Joko Widodo speaks about the tax amnesty program to members of the business community in Jakarta, February 2017.   © Reuters

JAKARTA - Indonesia's House of Representatives on Thursday endorsed a revision to this year's government budget -- which sees a lower revenue, increased spending and a widening deficit nearing the constitutional limit.

Revenue target is corrected to 1,736 trillion rupiah ($130.2 billion), 0.8% lower than the amount in the original budget, while spending plans rise 2.5% to 2133 trillion rupiah. This means a widening deficit from 2.41% to 2.92%, near the 3% limit allowed in the constitution.

Revenue target was cut after lower-than-targeted tax collection in the first half of 2017, following March's conclusion of the nine-month tax amnesty program that had buoyed previous collection. Meanwhile, spending plans were increased as Indonesia is preparing to host the Asian Games and organize elections for governors, mayors and regents in 171 local administrations next year.

Additionaly, screening process for the 2019 national legislative elections is due to start this year.

Although eventually endorsing the revision, lawmakers harshly criticized the deficit that is now very near the constitutional limit - as well as the government's swelling debts.

"What should have happened is increasing [revenue], not the other way around," Michael Wattimena of the Democratic Party told the House's Tuesday plenary session, according to local news portal liputan6.com. "What kind of financial condition is this that the state is in?"

The government, however, said the outlook for deficit is actually lower than  2.92% -- with actual spending projected to reach only 95-97% of the budgeted amount. "Seeing the trend of realized state expenditures over the past several years, especially those of ministries and state institutions, as well as funds for regions and villages ... the goverment's outlook for deficit by the end of 2017 is around 2.67% of the GDP," the Finance Ministry said in a statement.

Macroeconomic assumptions have been slightly altered. Economic growth is now projected at 5.2%, inflation rate at 4.3 %, the rupiah at 13,400 per dollar, and the Indonesian crude oil price at $48 per barrel. In the original 2017 budget, the figures were set at 5.1%, 4%, 13,300 rupiah per dollar and $45 per barrel, respectively.

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