"The government should boost its share of receipts from the tax sector."
Jakarta (ANTARA News) - The Indonesian government has set a deficit target of 1.6% in its 2013 state budget draft, which is lower than the 2.23 percent deficit in the current state budget, but an expert has expressed concerns over the projection, saying the absorption of external debt used to cover the budget deficit is low.

"Even though the deficit in the 2013 state budget draft has been set at a lower level compared with that of the 2012 revised budget, in which the budget deficit was 2.23 percent of the gross domestic product (GDP), there is no use if the absorption of external debts used to cover it is less than 90 percent," said Enny Sri Hartati, the director of the Institute for Development of Economics and Finance (Indef), on Thursday night.

She noted that the projected budget deficit for 2013, amounting to Rp150.2 trillion, or about 1.6 percent of the GDP, would be covered by external debt the absorption of which was unlikely to be optimum. "So far, the absorption of foreign debt used to cover state budget deficit has always been less than 90 percent. If that is the case, why we should borrow foreign money?" she asked.

Earlier on Thursday, President Susilo Bambang Yudhoyono unveiled the 2013 state budget draft at a plenary session of the House of Representatives (DPR). The budget amounted to Rp1,657.9 trillion, with total revenues expected at Rp1,507.7 trillion and a projected deficit of Rp150.2 trillion.

The deficit is the difference between the total revenues in the 2013 Draft State Budget (up 11 percent from the revenue target in the revised 2012 revised state budget) and state expenditures (7.1 percent higher than the expenditure set in the 2012 budget).

"In the 2013 state budget draft, we set the budget deficit at Rp150.2 trillion, or 1.6 percent of the GDP, which is less than the 2.23 percent figure in the 2012 revised state budget," the President said.

"Of the Rp1,507.7 trillion in revenues, about 80 percent will be derived from tax receipts, which have been set at Rp1,178.9 trillion, an increase by 16 percent from the 2012 revised state budget," he added.

According to the head of state, the funds to cover the budget deficit will come from the issuance of state securities (SBN). "Domestic financing sources are expected to provide Rp169.6 trillion, with foreign sources expected to contribute negative Rp19.5 trillion," the President stated.

"The external sources of funding would mainly be through programme loans and project loans, amounting to Rp45.9 trillion, excluding Rp7 trillion of existing debt principles and debt instalments worth Rp58.4 trillion," Yudhoyono added.

Meanwhile, Chief Economic Minister Hatta Rajasa said the government must achieve its tax revenue target of Rp1,178.9 trillion in order to reduce the state budget deficit.

"We need to reach our tax and non-tax state revenue targets, as we don`t want the deficit to widen," he said after attending the plenary session.

Hatta pointed out that the government had to rely more on tax revenues to reduce dependence on debts so it could cover the budget deficit. If state income fell short of the target, he added, the government would have to use more funds to plug the deficit, which could have a negative impact on the 6.8 percent economic growth target.

"We will then have to do what we don`t want to, cutting spending, which would slow down growth," he said, adding that the deficit target of 1.62 percent was healthy for the state budget and for sustainable economic growth.

"In my opinion, a deficit of less than 2 percent is safe," Hatta stated.

Legislator Romahurmuziy, from the United Development Party (PPP), said the state budget draft reflected the government`s prudence and optimism.

"The government`s optimism is reflected in a conservative but moderate economic growth target of 6.8 percent, while its prudence is reflected in its rational budget deficit target of 1.6 percent," he explained.

Enny also suggested that the government must raise its tax ratio to help cover the state budget deficit.

"The government should boost its share of receipts from the tax sector. It should not be the same as the current budget tax to GDP ratio of 12.5 percent," she said, adding that the ideal ratio should be at least 14 percent.

However, with regard to the deficit target set at 1.6 percent, Enny noted that the absorption of funds used to cover the deficit so far was not optimum, being less than 90 percent. "At the end of the year it is always less than 90 percent," she added.

"The amount of the government`s disbursed budget continues to increase every year, while the annual budget accumulates," Enny pointed out.

"If the annual disbursed budget continues to accumulate, what is the use in drawing up a budget with a deficit?" she asked, adding that the government must implement its programmes with comprehensive planning.

Enny stated that the budget should be carried out on schedule, with clear and measurable output and outcome. "If it turns out later that the budget is not enough, then the government can take loans by citing budget deficit. But the budget should not need to be revised within 2-3 months, as has been happening lately. That means it was never planned properly," she said.

Reporter: by Andi Abdussalam
Editor: Priyambodo RH
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