Wednesday, 01 April 2020 14:56

Indonesia Announces Rp 405 Trillion COVID-19 Budget, Anticipates 5% Deficit in Historic Move

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Firefighters spray disinfectant in the Thamrin business district in Jakarta on Tuesday Firefighters spray disinfectant in the Thamrin business district in Jakarta on Tuesday The Jakarta Post

Indonesia will issue a government regulation in lieu of law (Perppu) that will boost state spending by up to Rp 405.1 trillion (US$24.6 billion) as the budget deficit is anticipated to widen to 5.07 percent of GDP in the nation’s fight against COVID-19.

President Joko “Jokowi” Widodo said Tuesday the Perppu would serve as a foundation for the government and banking and financial authorities to carry out “extraordinary measures to ensure the people’s health, safeguard the national economy and financial system stability”.

Of the extra spending, the government will allocate Rp 75 trillion for healthcare spending, Rp 110 trillion for social protection and Rp 70.1 trillion for tax incentives and credit for enterprises. The biggest chunk, Rp 150 trillion, will be set aside for economic recovery programs including credit restructuring and financing for small and medium businesses.

“I have just signed a Perppu on state finance policy and financial system stability,” Jokowi said in a telebriefing. “We will issue the Perppu to anticipate the possibility of a state budget deficit that is estimated to reach 5.07 percent.”

The relaxation of the state budget deficit limit from the current legal limit of 3 percent of gross domestic product (GDP) will apply for three years until 2022. “Afterwards, we will return to imposing fiscal discipline of below 3 percent of GDP starting 2023,” he added.

Indonesia’s fiscal discipline has been lauded, as the country has never exceeded its self-imposed state budget deficit limit of 3 percent of GDP introduced after the 1998 Asian financial crisis. The move to widen the state budget deficit, the first time in history, comes as Indonesia declared a public health emergency that involves imposing large-scale social restrictions as stipulated in the Health Quarantine Law.

COVID-19 cases in Indonesia reached 1,528 on Tuesday with 136 deaths, just a month after the nation declared it had zero cases. (The Jakarta Post)

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