"The deficit should not exceed 2.4 percent. If it exceeds it, the margin to the three percent is too thin and will create certain risks," Deputy Finance Minister Mahendra Siregar said.
Jakarta (ANTARA News) - State budget deficit should be below three percent of the gross domestic product so that fiscal risks of additional expenditure on energy subsidy and social assistance will not be too high, a deputy minister said.

"The deficit should not exceed 2.4 percent. If it exceeds it, the margin to the three percent is too thin and will create certain risks," Deputy Finance Minister Mahendra Siregar said after attending a National Development Planning Meeting here on Tuesday.

He said that the government would soon submit a state budget revision because it had a macro assumption which was not suitable with the present condition, and the possibility of additional compensation as a result of subsidized fuel price increase plan.

Therefore, he expressed hope that the budget revision would anticipate the government`s policy with regard to the fuel oil price increase plan and difference of macroeconomic indicators. The anticipatory steps should not endanger budget deficit and create new risks.

"We have prepared anticipatory steps, but a late decision could create new risks and uncertainty," the deputy minister said.

Mahendra said the issue on additional fuel consumption had created negative impact on the fiscal soundness so that efforts to control deficit based on the law should be made. If the efforts made based on the law, the economic stability could also be maintained.

"Uncertainties could have negative impact, including on the public confidence on efforts to maintain the fiscal conditions. So, we have to be able to maintain economic stability," he said.

The government in the 2013 state budget set a deficit of Rp1.65 percent of the gross domestic product (GDP) amounting to Rp153.3 trillion. However, if there is additional expenditure on energy subsidy, deficit is expected to reach 2.4 percent of the GDP.

In the 2013 revised state budget, the deficit is predicted to expand because the government is required to provide compensation for poor society affected by subsidized fuel price hikes.

President Susilo Bambang Yudhoyono has earlier said that state revenues in the 2013 State Budget were set at Rp1,529.7 trillion with state expenditure set at Rp1,683 trillion. This leaves a deficit of Rp153.3 trillion, or 1.65 percent of the GDP.

Of the 2013 Stage Budget, some Rp317.2 trillion was set for subsidies of which Rp193.8 trillion for fuel oil.

"If not controlled, total subsidies could reach Rp446.8 trillion and fuel subsidy could reach Rp297.7 trillion. This could increase the deficit to reach Rp353.6 trillion or about 3.83 percent of the GDP.

Therefore, the President asked all government officials to understand the country`s fiscal and state budget conditions so that they would have the same views when efforts were taken to improve the fiscal soundness.

"I want to make this clear because not all have the same views over the matter. It should not happen that we do not have sense of crisis, sense of urgency and sense of responsibility," the President said in his address before governors, district heads, mayors and ministers attending a National Development Planning Meeting (Musrenbangnas) here on Tuesday.

The head of state said that with increasing fuel oil subsidy burden, the government should give serious attention to the fiscal and state budget conditions.

"We should not lack attention, lack understanding of priorities and lack sense of responsibilities as if the fiscal and state budget is in good conditions or in business as usual," the president said.

He added: "We should really understand the problem of fiscal and state budget conditions. All should understand beginning from ministers to leaders of non-ministerial state agencies, non-governmental state agencies, governors, district heads, mayors and regional legislative assembly members.

President Yudhoyono said that the government has to cut fuel oil subsidy to maintain budget stability and alleviate the state budget burden. "To be frank, the state budget is less sound and less secure. If not improved, our budget deficit will exceed three percent and violate the law. With a big deficit, our economic resilience will be disturbed," he said.(*)

Editor: Heru Purwanto
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