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The government may opt to increase the deficit rather than
tinker with current allocations should disaster-mitigation spending
eventually put a strain on the national budget, the finance minister
says.
The government would also look into the possibility of using unspent
funds from previous fiscal years to cover any shortfalls.
"We'll explore every financing option we have, taking into account
those that entail the least fiscal risk," Finance Minister Sri Mulyani
Indrawati was quoted by Antara as saying Wednesday.
"We'll see if we have to widen the deficit to cover the funds needed to
cope with the aftermath of the recent floods, the earthquake in Padang
and the landslide in East Nusa Tenggara. Redirecting agreed budget
allocations may be difficult to do."
Mulyani declined to say how much the deficit might have to be widened.
However, State Minister for National Development Planning Paskah
Suzetta, said separately that this year's budget deficit could reach
1.3 percent of gross domestic product, and that the Rp 2 trillion
budget allocation for emergency disaster relief would almost certainly
have to be increased.
"How much more money will be needed is being discussed with the House
of Representatives, but (the allocation) will certainly be revised," he
said.
Paskah has suggested that any widening of the deficit be financed
through more government bond sales, and optimizing the use of agreed
budget allocations.
The government had expected this year's budget deficit to come in at Rp
40.5 trillion (US$4.3 billion) -- or 1.1 percent of GDP -- in line with
efforts to keep the budget deficit at check, while at the same time
allowing enough slack to support economic expansion.
Last year's budget deficit ended up at 0.7 percent, lower than the
expected 0.9 percent, and was to blame in part for lower growth. The
State Finances Law permits a budget deficit of up to a maximum of 3
percent of GDP.
The government plans to finance this year's budgetary gap through Rp
40.6 trillion in bond sales, Rp 40.3 trillion in gross foreign loans,
Rp 14.5 trillion in dividends from state firms, Rp 12.9 trillion from
government account funds, Rp 2 trillion in privatization proceeds and
Rp 1.5 trillion in proceeds from the sale of state assets.
During a recent hearing with the House on disaster mitigation funds,
Minister Mulyani had acknowledged the need for more rapid disbursement,
but also stressed the need to comply with the set requirements and
procedures.
She suggested the such funds also be covered by the annual mid-term
budget revision, rather than bending the rules to disburse them
overhastily.
"I'm quite sure that even if the money is there, the projects will only
start in the second half of the year. So, we might as well include them
in the revision process," she said.
"So it's actually not a question of the budget, but rather of planning
and execution. But, we will abide by whatever political decisions are
made.".
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