We have three years to return the deficit to 3 percent so that Indonesia's exposure to debt will decline when the challenges to high interest rate emerge
Jakarta (ANTARA) - Indonesia is seeking to slash its budget deficit this year to Rp100 trillion lower than the government-set ceiling of Rp868 trillion, or 4.85 percent of the gross domestic product (GDP), Finance Minister Sri Mulyani Indrawati has said.

"We are trying to slash it (budget deficit). Last year, we have reduced the issuance of bonds. The deficit which stood at Rp1,000 trillion (in 2021) fell to around Rp800 trillion. This year we are trying to lower it again. According to our calculation, the decline will be at least Rp100 trillion or more," Indrawati said at the CNBC Economic Outlook 2022 in Jakarta on Tuesday.

The government is focusing on fiscal consolidation to return the budget deficit to a level of 3 percent by 2023, after it was allowed to set the deficit at above 3 percent, in accordance with Law No. 2 of 2020.

The state budget came under extraordinary pressures in 2020 so the deficit reached Rp956.3 trillion, or 6.09 percent. However, it returned to a level of 4.65 percent, or Rp783.7 trillion, in 2021.

The minister said she is optimistic that the 2022 budget deficit will decline owing to a state revenue windfall from commodity prices.

The deficit will also decline since the government will maintain spending by refocusing on essential and priority sectors so that Indonesia will have the space to reduce debt exposure.

"We have three years to return the deficit to 3 percent so that Indonesia's exposure to debt will decline when the challenges to high interest rate emerge," she explained.

The budget deficit can also be lowered and the economic foundation improved despite the risk of a Fed rate hike, she said.

The government has also issued a joint decree (SKB) III with Bank Indonesia to finance the deficit.

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Translator: Astrid Faidlatul , Suharto
Editor: Sri Haryati
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