Budget deficit should not exceed 2.7 percent: Minister

Jakarta (ANTARA News) - The budget deficit should be maintained at a level not exceeding 2.7 percent of the gross domestic product (GDP), Coordinating Minister for Economic Affairs Darmin Nasution has said.

The 2.7 percent almost reached the limit permitted under the Law on State Finance at three percent of the GDP, he said. "It should be below 2.7 percent," Nasution said in Jakarta Friday.

There is an additional increase in the budget deficit proposed by the Minister of Finance, Nasution acknowledged.

But the state budget should be managed optimally to not disrupt the economic performance and violate the state finance law.

For that, the budget deficit should not exceed three percent of the GDP, and should be in the range of 2.5 percent, according to him.

All possibilities must be taken into account, including the regional budget deficit that could reach 0.3 percent.

"If the regional budget deficit in the region is closer to 0.3 percent, it means the deficit in the central government should not reach 2.7 per cent. It must be below that level and should not approach it," Nasution said.

There is no plan to cut the spending of ministries in the 2016 revised budget, Nasution assured. However, there is an effort to overcome the possibility of widening the budget deficit, through the addition of payment in the debt sector.

"Three-month short term bonds could be issued, such as the T-Bills in the United States. It can be managed if there is a financing problem," Nasution said.

However, for the moment, the government still relies entirely on state revenues from taxes, and especially on the result of the tax amnesty program which is targeted to reach Rp165 trillion, Nasution said.

"We will see the tax amnesty development until the end of September. At the beginning, everyone considered it too little, but as it turned out, the result was not that bad," he said.

Earlier, Finance Minister Sri Mulyani Indrawati projected that the budget deficit at the end of the year would be in the range of 2.5 percent of the GDP, but the estimate could not be reached if state revenues did not reach their potential and spending cut was ineffective.(*)