JakartaPost-July 9, 2024
The central government’s fiscal deficit this year is projected to be much larger than planned as the state is set to spend more but collect less in tax than laid out in the budget for this year. Finance Minister Sri Mulyani Indrawati revealed on Monday that the deficit is now seen at 2.7 percent of gross domestic product (GDP), far outstripping the figure of 2.29 percent stated in the 2024 state budget plan. Speaking in front of the House of Representatives’ budget committee, Sri Mulyani attributed the higher deficit projection to “a combination of state revenue undergoing a correction” and “state spending experiencing positive growth”. Sri Mulyani detailed in her presentation that tax revenue this year, according to the latest projection, would reach only 96 percent of the targeted amount, but she went on to highlight that the nominal value would still mark an annual increase of 2.9 percent, indicating a “safe national economy”. Shortly beforehand, she had revealed that the government had been struggling to collect taxes in the first half of 2024 because of the “decline in commodity prices” taking a toll on corporate profits. Overall tax revenue in the first half was down 7 percent year-on-year (yoy), with corporate income tax plummeting 34.5 percent yoy. Collection in the mining industry experienced the most significant contraction at 58.4 percent yoy, followed by manufacturing with a 15.4-percent annual decline. State spending, on the other hand, was projected to be almost 2.6 percent or Rp 87.1 trillion (US$5.36 billion) over budget, driven by spending on central government ministries and agencies, which is seen to exceed the planned figure by almost 10 percent. Sri Mulyani mentioned that funding for the construction of the new capital city of Nusantara, social assistance and regional elections was among the factors fueling the higher spending. Read more at: https://www.thejakartapost.com/business/2024/07/09/excess-spending-tax-shortfall-to-drive-deficit-far-beyond-budget-plan.html.
