JAKARTA: Indonesia’s government will not change rules that cap its fiscal deficit at 3% of gross domestic product (GDP), Finance Minister Sri Mulyani Indrawati (pix) said on Thursday.
The comment was made after Bloomberg News reported President Joko Widodo and his cabinet were discussing amending the legal deficit limit, which would allow the government to spend and borrow more, citing Indrawati.
“The president has said...that the role of fiscal policy now is right, prudent and its managed well,“ Indrawati told reporters.
“Ideas for changes are welcomed, but the president has directed us...there is no intention to change the rules,“ she said.
Officials at her ministry a day earlier said there would be no imminent change to the 2003 State Finances Law, which stipulates that the budget deficit in a fiscal year cannot be more than 3% of GDP and total public debt cannot breach a limit of 60% of GDP.
The ministry’s spokesman late on Wednesday said the current focus for legislation was to pass two bills, including one on taxation that calls for corporate tax cuts, while a revision to the 2003 law was not a priority.
The 2003 law was introduced in the aftermath of the Asian financial crisis in the late 1990s to avoid excess borrowing.
This year, weak tax income is set to push the fiscal deficit to 2.2% of GDP, compared with an initial forecast of 1.84%, according to the latest estimate by finance ministry officials.
Some economists have criticised Indrawati for her conservative fiscal policy at a time when economic growth is slowing. Indrawati has projected a fiscal deficit of 1.76% of GDP in 2020. -Reuters