Apindo Says The Government Must Be Consistent So That Fiscal Policy Does Not Increase The Burden Of People's Purchasing Power

Illustration-(Photo: DOK ANTARA)

JAKARTA - President Joko Widodo has submitted the Draft Law on the State Revenue and Expenditure Budget (RUU APBN) for Fiscal Year 2025 and Financial Note at the DPR RI Plenary Session for Session 2024-2025 at the MPR/DPR/DPD Building, Friday 16 August 2024. Broadly speaking, in the RAPBN, state expenditures reached IDR 3,613.1 trillion, with a tax revenue structure of IDR 2,490.9 trillion, Non-Tax State Revenue (PNBP) of IDR 505.4 trillion. To patch the expenditure deficit, the 2025 RAPBN is designed to attract debt equivalent to 2.53 percent of Gross Domestic Product (GDP), or around Rp642.6 trillion. APINDO Economic Policy Analyst Ajib Hamdani said that the structure of the 2025 RAPBN is quite interesting to observe, especially because this is the first year of transition to a new government under the leadership of Prabowo-Gibran. Ajib explained in terms of spending which made the figure balloon, one of which was due to the shifting effect of the COVID-19 pandemic. Because the state debt during the 3 years of the pandemic increased debt by more than Rp2,100 trillion and the maturity of gradual payments, in 2025 this will erode the state budget of Rp800.33 trillion. Plus the populist program from the Prabowo-Gibran government in the form of free nutritious meals, requires a significant allocation in this expenditure post. "This condition includes increasing state spending," he explained in his statement, Sunday, August 18. Meanwhile, in terms of taxation which is targeted to reach Rp2,490.9 trillion, according to Ajib, this is also quite challenging and at least 3 need to be constructively criticized, namely first, the issue of increasing the tax ratio which is quite aggressive, which has the potential to be counterproductive to economic activities. "Second, the issue of increasing the Value Added Tax (VAT) rate to 12 percent as stated in the Law on Harmonization of Tax Regulations (HPP), which will reduce people's purchasing power. And the third is the discourse on extensification of excise duty, especially for plastic commodities and Packaging Sweetened Drinks (MBDK) which will increase the burden on the business world, both the corporate sector and also MSMEs," he explained. Furthermore, in the Non-Tax State Revenue (PNBP) sector, Ajib said that the government should focus more on the arrangement of State-Owned Enterprises (BUMN) so that they can further encourage efficiency and run good corporate governance (GCG) so that the dividend contribution to the state is maximized. After that, Agjib suggested that State Capital Participation (PMN) should be more selective and prudent. Based on reference data in 2023, SOEs deposited dividends of IDR 82.06 trillion and then withdrawn in PMN form in 2024 amounting to around IDR 27 trillion, not yet the ideal achievement. "Because the net contribution of all SOEs to the state ranges from Rp55 trillion, compared to the total value of all SOE assets which reached Rp10,000 trillion. If the government can increase the BUMN return on asset (RoA) standard, then the contribution to the state can be targeted to increase more significantly," he said. Furthermore, Ajjib explained that in terms of debt, it will always be a long discussion, about the health of state finances, a maximum ratio of 3 percent of GDP running, as well as prudent and responsible debt management. According to Ajib, this state debt is a form of fiscal deficit policy, the necessity of a developing country that wants to spur economic growth. Therefore, Agjib said that the government must focus and be consistent so that budget policies can achieve long-term targets, at least in 3 things, namely improving the quality of human resources (HR), downstreaming that can provide added value to the economy and involve all economic stakeholders and also the sustainability of infrastructure that supports economic transformation. This is in line with the program of the elected president, Prabowo Subianto. "Finally, it is the hope of the community and the business world. The community has high hopes so that budget politics and fiscal policy do not add to the burden on people's purchasing power which is likely to decrease," he said. Ajib said that from the business world, there are several expectations, namely first, so that the government is more involved in the private sector in drafting technical policies, or in line with the concept of meanful participation.

Furthermore, the government must apply quality spending principles, not just as long as spending (spending better, not better to spending and the government must encourage pro policies with growth and equity.