The minister highlighted the extraordinary level of money that had been poured into the economy last year to anchor business activity and combat the pandemic, warning that the state budget had a limitation and could not act alone in rescuing the economy.

Indonesia has been battered by COVID-19. (Photo: Indonesia Expat)

Indonesia needs reform to attract investment and mass vaccination to build confidence of speeding up domestic consumption recovery, she said, adding the economic recovery should not only depend on the state budget as it will not be enough to compensate for falls in consumption, investment and export activity.

The country’s budget deficit soared to a record 956.3 trillion IDR (68.6 billion USD) last year as the COVID-19 pandemic fueled enormous government spending while tax revenue plunged as households and businesses struggled with the pandemic-induced economic downturn. The deficit, which is equal to 6.09 percent of the country’s GDP, and is also nearly three times as large as the 348.7 trillion IDR deficit in the 2019 fiscal year.

As much as 2.58 quadrillion IDR was spent to fund development projects, combat the pandemic, and provide relief for households and businesses in 2020, up 12.2 percent year-on-year and accounting for 94 percent of the Government’s target.

On the other hand, the government collected 1.63 quadrillion IDR in state income last year, a sharp drop of 16.7 percent year-on-year and around 96 percent of the government’s target, as income from taxes plunged due to slowing economic activity and the rollout of several tax stimuli.

The government issued 1.17 quadrillion IDR worth of sovereign debt papers last year, up 163.8 percent compared to the previous year, causing the government debt to soar to 38 percent of GDP from 30 percent in 2019.

The finance minister added that as the recovery continued, the fiscal picture would improve as people began spending more money and companies started to expand operations.

The state budget deficit is expected to reach 1 quadrillion IDR in 2021, or 5.7 percent of GDP, as the government prepares 2.75 quadrillion IDR in spending to fuel the virus-battered economy.

Source: VNA