The Challenge of Deficit Financing
JAKARTA, KOMPAS — (8/9/2021) Financing the budget deficit is a challenge that the government must answer in the midst of efforts to recover the economy from the Covid-19 pandemic. Therefore, the reallocation of the state budget needs to be more focused on priority programs that have a multiplier effect on recovery.
The government set a deficit in the 2022 State Budget Draft (RAPBN) at 4.85 percent of gross domestic product (GDP). This target is in line with the government’s fiscal consolidation plan towards a maximum deficit of 3 percent of GDP in 2023.
In the Kompas daily economic panel discussion, Tuesday (7/9/2021), Head of the Fiscal Policy Agency of the Ministry of Finance Febrio Kacaribu explained that the budget in the 2022 RAPBN is important in fiscal reform measures to achieve the budget deficit target to an optimal level in 2023.
Febrio said, “For this reason, the 2022 RAPBN is designed to remain flexible and sustainable so that it can be responsive, anticipatory, and adaptive to support the acceleration of handling Covid-19 and socio-economic recovery”.
He said the focus of state expenditure allocation in 2022 would lead to priority programs in the fields of health, social protection, education, infrastructure, information and communication technology, food security, and tourism. State spending in the 2022 RAPBN is projected to reach Rp 2,708.7 trillion.
These priority areas were chosen because they are believed to be able to boost the performance of the consumption, investment, export, and production sectors, which had stalled at the beginning of the Covid-19 pandemic period. “The strategy to accelerate socio-economic recovery will continue to prioritize strengthening health as the key to economic recovery,” Febrio said.
He continued that the recovery momentum in priority sectors next year will also be supported by structural reforms driven by the implementation of the Job Creation Act, the operation of the Investment Management Agency, and the implementation of the Risk-Based Online Single Submission system.
Spending Quality
In this discussion, a lecturer at the Faculty of Economics and Business at Universitas Indonesia, M. Chatib Basri, said that the main key for Indonesia to pursue economic recovery without disrupting the sustainability of fiscal stability is to improve the quality of state spending.
Chatib said that “Budget reallocation is an absolute must. The priority of financing is focused on the health sector, social protection, MSMEs, and sectors that have a multiplier effect for the economy.”
Chatib also reminded that the economy can only recover if the pandemic can be overcome. If the reallocation of state spending is directed to priority programs, he believes the budget deficit will be maintained as well as having implications for reducing additional debt. In terms of income, tax revenue needs to be increased without burdening taxpayers through improving tax administration.
Meanwhile, the Rector of Atma Jaya Catholic University Jakarta, A. Prasetyantoko, assessed that the government’s desire to apply a too strict fiscal discipline needs to be relaxed, considering that the end of the pandemic is still unknown.
“The target that we have to return to a 3 percent APBN deficit in 2023 is very dependent on the development of the situation. If the situation does not allow for a strict discipline, fiscal policy can be made more relative to our need to prepare human capital that is more competitive.” Prasetyantoko stated.
He said that the development of human resources should be the government’s top priority. In the midst of a crisis situation and limited fiscal capacity, the government must choose a priority between financing physical development projects or funding to improve the quality of human resources through strong social protection and health programs.
Prasetyantoko said that “Human capital development is very urgent, so we have to choose. This crisis has seriously hit community groups, especially the very poor.”
A SMERU researcher, Athia Yumna, said that a strong social protection program can prevent a rise in poverty. SMERU’s research shows that without social assistance programs during the pandemic, the poverty rate could potentially reach 13.38 percent. This figure is much higher than the percentage level of the factual poor as of March 2021, which is 10.14 percent. (DIM/AGE).
Source: Kompas Daily. Edition: Wednesday, September 8, 2021. Rubrik Umum. Page 1 continued on Page 15.
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