Economist: New Government Needs to Balance Spending Plans with Limiting Fiscal Deficit

JAKARTA - Economist Radhika Rao said the new government with the President and Vice President of the Republic of Indonesia elected in the 2024 general election, needs to balance spending plans with limiting the fiscal deficit to support sustainable economic growth and prevent a spike in debt.

"The new government needs to balance its expansionary spending plans with the need to limit the fiscal deficit below the threshold of minus 3 percent of gross domestic product (GDP) and prevent a spike in public debt levels and borrowing costs," said the DBS Bank economist in Jakarta, quoted by Antara, Thursday, April 18.

On March 20, 2024, the Indonesian General Election Commission (KPU) confirmed Prabowo Subianto and Gibran Rakabuming Raka as elected president and vice president of the Republic of Indonesia by winning 58.6 percent of the vote in the February 2024 general election (election).

Radhika said that the new government is expected to follow up on the policies and reforms issued by Indonesian President Joko Widodo, such as efforts to downstream commodities, further restrictions on ore exports, encouraging infrastructure, and maintaining a pro-business approach.

In addition, allocations for social welfare programs and subsidies can be increased to support household purchasing power.

With the election over, he expects a revival in investment commitments, also aided by private sector spending, boosted consumption, and positive fiscal impulses.

"This domestic catalyst is likely to offset the weakening in the trade sector which shrank the goods surplus in January-February by almost 70 percent year on year (yoy)," he said.

Previously, the Deputy Minister of Finance of the Republic of Indonesia, Suahasil Nazara, said that government debt withdrawals as of January 2024 would reach IDR 107.6 trillion or 16.6 percent of the State Revenue and Expenditure Budget (APBN) target of IDR 648.1 trillion.

"Budget financing is on track, we have realized financing of IDR 107.6 trillion in 2024," said Suahasil during the February 2024 edition of the KiTa APBN press conference in Jakarta, Thursday (22/2).

Suahasil said the government will continue to monitor financial market dynamics, so that the issuance of Government Securities (SBN) can be carried out efficiently and can mitigate all risks at the global level.

The State Budget (APBN) experienced a surplus of IDR 22.8 trillion as of March 15, 2024. The surplus value was obtained from state revenues which were higher than state expenditure.

State revenue was recorded at IDR 493.2 trillion or equivalent to 17.6 percent of the target of IDR 2,802.3 trillion. Meanwhile, state spending was recorded at IDR 470.3 trillion. This value is equivalent to 14.1 percent of the budget ceiling of IDR 3,325.1 trillion.