If the economy declines and the tax receipts weaken, we must prepare ourselves to raise the deficit
Jakarta (ANTARA) - Finance Minister Sri Mulyani Indrawati has forecast that Indonesia’s 2020 state budget deficit will potentially widen in the face of the current global uncertainty.

"If the economy declines and tax receipts weaken, we must prepare ourselves to raise the deficit," she stated at Hotel Ritz-Carlton in Jakarta on Wednesday.

Indrawati was unaware of the extent to which the deficit will be raised since she had yet to gauge the condition ahead along with various factors in order to set it.

"We will first look at its calculation combined with various factors. However, we have taken precautionary measures against it since in the 2020 state budget law, it has been set at 1.76 percent of the GDP. That is conservative enough," she explained.

When the Indonesian economy weakens, the government will unlikely tighten its policies. Hence, it will offer stimuli to enable the smooth running of the Indonesian economy, she stated.

"If the government tightens its belt, what will happen is a procyclical condition or a weak economy, and we cut all expenditures, our economy will nosedive," she pointed out.

Hence, in case of external pressure on the domestic economy, the government must prepare a countercyclical policy to maintain the economic growth, she remarked.

"There must be countercyclical policy. If the economy weakens, I must not be weak and I must free it," she explained.

The government will offset the widening budget deficit by issuing new debt securities due in three decades, with an interest rate of three percent, among others, she remarked.

"The deficit will be financed from financing. Today, we can issue 30-year bonds, with an interest rate below three percent. Since now it is February, we will look ahead whether it will be wider than expected in the 2020 state budget law," she added. Related news: Indonesia, US trade balance can potentially record deficit: Ministry

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Translator: Astrid Faidlatul Habibah/Suhar
Editor: Fardah Assegaf
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