Indonesia finance ministry lifts pandemic recovery budget again

MACROECONOMICS - JAKARTA. Indonesia's government had increased its budget to control the coronavirus pandemic and help the economy recover to 699.43 trillion rupiah ($49.60 billion), a Finance Ministry presentation showed on Tuesday.

"This is the most important engine in our economy right now," Finance Minister Sri Mulyani Indrawati said during the virtual presentation.

The budget has been increased several times from an initial 372.3 trillion rupiah figure and the new figure marks a 21% increase from realised pandemic spending last year.

The budget, especially social assistance for the poor and help for businesses, is expected to lift growth in the first quarter of this year, Sri Mulyani said.

First quarter gross domestic product is expected to improve from the fourth, and "hopefully" post positive growth, deputy minister Suahasil Nazara told the same briefing.

Southeast Asia's largest economy suffered its first contraction in over two decade last year as the pandemic hit consumption and investment.

For this year, Sri Mulyani has forecast GDP growth of 5%.

Meanwhile, the fiscal deficit target for 2021 remains at 5.7% of GDP despite the latest spending expansion plan and the ministry is also planning to lower its debt issuance this year.

"To reduce pressure and because we have a large cash position, we will use part of the (2020) excess budget funding of around 80 trillion to 100 trillion rupiah to lower our bond issuance target," Luky Alfirman, a senior ministry official said.

Indonesia had targeted a net bond issuance of 1,207.3 trillion rupiah this year.

The government may not make significant changes to the pandemic response budget after the latest increase, ministry official Kunta Wibawa Dasa Nugraha said.