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Ministry of Finance Will Change Mandatory Spending Portion in The State Budget

Monday, 06 April 2020

Ministry of Finance Will Change Mandatory Spending Portion in The State Budget

JAKARTA. A number of expenditure allocations in the State Budget (Anggaran Pendapatan dan Belanja Negara/APBN) 2020 will be adjusted, following the issuance of Government Regulation in Lieu of Law (Peraturan Pemerintah Pengganti Undang-Undang/Perppu) number 1 of 2020. One of the allocations affected by the adjustment is mandatory spending, which has always been the same portion in APBN, such as the budget for education, health, regional transfer fund and village fund (see table).

As quoted from kontan.co.id, the adjustment of mandatory budget allocation is a part of the government's efforts to meet the needs of handling the spread of the Corona Virus Disease 2019 (Covid-19). However, the government ensured that some allocations in mandatory budgets, only the portion of education budget that would not change.

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

Number Budget Mandatory AmountAPBN 2020
1Education20%IDR 156,9 trillion
2Health 5%IDR 61,1 trillion
3Regional Transfer Fund25% for Regional InfrastuctureIDR 72,2 trillion
4Village Fund allocation10% of Fiscal balance fundIDR 72 trillion

Source : Ministry of Finance

As we know, the government will increase the budget for health spending by IDR 75 trillion, social protection of IDR 110 trillion, incentives for the business world of IDR 70.1 trillion and the budget for financing the national economic recovery program of IDR 150 trillion. Thus, the budget for health allocation will increase to IDR 136.1 trillion and the social protection budget to IDR 336.4 trillion.

In addition to changing the portion of the mandatory spending, the government will also shift the budget allocation between organizational units, between functions and between programs and the use of alternate budgets such as accumulated cash surplus (Saldo Anggaran Lebih/SAL).

Deficit Scenario

With these various expenditure reallocation formulas, the government hopes that the widening of the State Budget (APBN) deficit will not be as high as expected.  Previously, the government estimated the state budget deficit in the worst conditions could reach 5%.

Citing Bisnis.com, the government sees that there is still room for deficits to be at the 4-5% level.  In addition to the use of SAL, the government also sees that there is room for the unrealized use of Ministries/ Institutions (Kementerian/ Lembaga/K/L) budget, as well as the fuel subsidies budget that will also drop, considering that consumption has fallen due to restrictions on community activities. 

 




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