Facing Critical Condition, Indonesia Poured Out IDR 405 Trillion to Address Covid-19

The Indonesian government considers the corona outbreak (Covid-19) to be more widespread and claimed thousands of casualties as the urgency of forcing health emergencies and carrying out large-scale social restrictions. In line with that, the government has budgeted an additional fund of IDR 405,1 trillion to support the extraordinary policy of the Covid-19 pandemic countermeasures, as well as to save economic and stability of the national financial system. 

President Joko Widodo in his statement to the public Tuesday (31/3), detailing the additional fund allocation of IDR 405,1 trillion to support the following activities: 

1. National economic recovery program of IDR 150 trillion;
2. Additional funding in the health sector IDR 75 trillion;
3. Social safety net program of IDR 110 trillion; and
4. Tax incentives and stimulus for People's Business Loans (Kredit Usaha Rakyat/KUR) of  IDR 70.1 trillion.
   

The national economic recovery program includes loan restructuring and guarantees, as well as financing for Micro, Small and Medium Enterprises (MSMEs/UMKM) and the business world. While activities in the health sector include the protection of health workers, the purchase of medical devices, the improvement of health facilities, and incentives for doctors. For social safety net, the focus is on increasing the budget for food staple card, pre-employment card and electricity subsidy.

Read : Indonesia Cuts Tariff on Corporate Income Tax and Officially Applies Digital Taxes

Previously, the government had detailed the aid package for communities affected by the corona pandemic as follows:

1. Increase the number of beneficiaries of the Family Hope Program (Program Keluarga Harapan/PKH) from 9.2 million families to 10 million families;
2. Increase the number of Food Staple card beneficiaries from 15.2 million recipients to 20 million recipients;
3. Increase the Pre-Employment Card budget from IDR 10 trillion to IDR 20 trillion;
4. Reserve budget of IDR 25 trillion to meet basic needs and market operation as well as logistics.
5. Exemption for 24 million of 450 VA (Volt Ampere) electricity customers from bills over the next three months;
6. Provide a 50% discount for 7 million of 900 VA customers over the next three months;
7. Relief of credit payment lower than IDR 10 billion for informal workers (online motorcycle taxis and taxi drivers) and MSMEs, as well as fishermen.
   

As a consequence of the extraordinary policies, the 2020 State Budget deficit is certain to swell with an estimate of 5.07% of Gross Domestic Product (GDP) or exceeding the maximum limit of 3% of GDP mandated by State Finances Law (Undang-Undang Keuangan Negara). Previously, the 2020 State Budget allocated IDR 2,540.4 trillion of state expenditure and targeted a deficit of IDR 307.2 trillion or 1.76% of GDP.

The national scale policy is strengthened by issuing Government Regulation in Lieu of Law (Perpu) Number 1 of 2020 concerning State Financial Policies and Financial System Stability for Handling Pandemic Corona Virus Disease 2019 (Covid-19) and / or In the Context of Facing Threats that Endanger the Economy  National and / or Financial System Stability, which is effective since enactment on 31 March, 2020.

Along with the previous regulation, the government also issued Government Regulation Number ( Peraturan Pemerintah /PP) 21 Year 2020 on Large-Scale Social Distancing in Order to Accelerate Corona Virus Disease 2019 (Covid-19) Handling and Presidential Decree ( Keputusan Presiden/Keppres Number 11 Year 2020 on Public Health Emergency due to Corona Virus Disease 2019 (Covid-19).