Realization of Indonesia's Budget Deficit in the First Half of 2013

Realization Budget Deficit/Surplus First Six Months:

 

Year	IDR Billion	% of GDP
2010	47.9	1.60% (surplus)
2011	54.7	36.3% (surplus)
2012	36.1	0.91% (deficit)
2013	54.5	0.58% (deficit)

Target in State Budgets:

 

Year	IDR Billion	% of GDP
2010	133.7	2.1%
2011	150.8	2.1%
2012	190.1	2.2%
2013	224.2	2.4%

The deficit in the first half of 2013 is due to government spending that exceeds state revenues. In the first six months of 2013 (I/2013), state expenditures have absorbed IDR 677.7 trillion, while state revenues and grants reached IDR 623.2 trillion.

The low realization of the deficit in I/2013 is due to non-optimal state spending. In I/2013, state expenditure only reached 39.3 percent of the target that is set in the 2013 state budget (IDR 1,726.2 trillion) and is also lower than in the same period in 2012 (40.7 percent).

A slowdown in the realization of state spending occurs both in central government expenditure and in the transfer of funds to Indonesia's regional governments. Central government spending, which includes capital expenditures, personnel, goods expenditure, subsidies, interest payments on debt, social spending, and grant expenditures absorbed only IDR 421,1 trillion or 35.2 percent of the target (IDR 1,196.8 trillion), and is lower than realization in I/2012 (36.8 percent).

Realized Government Spending in First Six Months:

 

	2012 (%)	2013 (%)
Central Government Spending	36.8	35.2
- Personnel	49.0	45.9
- Goods Expenditure	22.4	22.2
- Capital Expenditure	18.2	18.1
- Payment of Debt Obligations	42.1	46.9
- Subsidies	55.0	44.7
- Grants	0.4	0.4
- Social Expenditure	54.5	32.3
- Other Expenditure	4.2	3.6
- Additional Expenditure	-	-
Transfer to Regions	49.2	48.5

Minister of Finance, Chatib Basri, said that the realization of state spending in 2013 is far too low. After I/2013, the figure stood at 0.58 percent of GDP but should have been around 1.2 percent of the country's GDP. The low realization implies non-optimal government spending and, if the government wants to meet its target at the end of the year, it needs to undertake massive spending in II/2013. Considering that Indonesia's economic growth is under the threat of a slowdown to below the 6.0 percent line (YoY), government spending should be as optimal as possible. Moreover, considering that the government has borrowed money from domestic and international creditors, the government thus pays interest for loans that remain unused or unproductive.

In line with the State Budget law, the government's budget deficit should be kept below 3 percent of the country's GDP. But if we look at realized outcomes in recent years, it has never been able to come close to the 3 percent line.

Deficit Target and Realization:

 

Year	Target	Realization
2008	0.1	2.1
2009	1.6	2.4
2010	0.7	2.1
2011	2.1	1.3
2012	2.2	1.8

In the original 2013 State Budget, the government targets a budget deficit of IDR 153.3 trillion or 1.65 percent of GDP. However, for the 2013 Revised State Budget, Indonesia's parliament and government agreed to raise the figure to IDR 224.2 trillion or 2.38 percent of GDP, which will be financed through the Budget Surplus (Saldo Anggaran Lebih) and securities (Surat Berharga Negara).

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