Data released by a department of Indonesia's Ministry of Finance showed that the country's budget deficit amounted to IDR 25.9 trillion (USD $2.64 billion) on 31 May 2013. This figure is equivalent to 16.9 percent of the target that is set in the 2013 State Budget (IDR 153.3 trillion). The IDR 25.9 trillion deficit translates to 0.27 percent of Indonesia's gross domestic product (GDP). The maximum amount of deficit - as stipulated by the State Budget Law of 2013 - that is allowed to be maintained is equivalent to 1.65 percent of GDP.
The current deficit is in sharp contrast with May 2012 when the budget recorded a surplus of IDR 27 trillion.
The budget deficit per 31 May 2013 is caused by government expenditures that exceed revenues and grants. Government spending stood at IDR 528.1 trillion (USD $53.9 billion), or 31.4 percent of this year's target, while government revenues and grants totaled IDR 502.2 trillion (USD $51.2 billion), or 32.8 percent of the target set for 2013.
Most of the government's revenues and grants are gained through taxation and non-tax state revenue (PNBP). Up to 31 May 2013, the government received IDR 396.7 trillion in tax money, which is 33.2 percent of the target that has been set in the 2013 State Budget (IDR 1,193 trillion). Funds from grants totaled IDR 104.8 trillion, or 31.6 percent of this year's target (IDR 332.2 trillion).
Of the IDR 528.1 trillion that is used for government spending, IDR 317.3 trillion is used for central government spending and the remaining IDR 210.8 trillion is transferred to the regional governments.
Central government spending is dominated by Indonesia's controversial subsidy-spending. About 34.6 percent of total central government funds (IDR 109.7 trillion) are used to finance subsidies: IDR 94.9 trillion for energy subsidies and IDR 14.8 trillion for non-energy subsidies. Most of energy subsidies (IDR 61.3 trillion) are used to pay state-owned oil company Pertamina that is forced to sell fuel far below market prices. The remaining IDR 33.6 trillion is transferred to state-owned Perusahaan Listrik Negara (PLN), the sole electricity provider in Indonesia, to cover for electricity subsidies.
Energy subsidies have increased significantly compared to last year. This situation makes many economists concerned about the state of the Indonesian economy as large subsidies result in a distorted economy and place serious stress on the state budget. Various economist advise to reduce energy subsidies by raising the price of subsidized fuel. This measure will also increase foreign confidence in the Indonesian market. Standard & Poor's downgraded the outlook of Indonesia's economy from positive to stable mainly because of the energy subsidies. Last month, Susilo Bambang Yudhoyono announced that the price of subsidized fuel will be raised this June (after the House of Representatives will have agreed on cash compensation programs for the poor). However, the exact date of the price hike is yet to be announced. This subsequently causes uncertainties in the economy as can be seen by the fall of Indonesia's main stock index (IHSG) after large scale net sales by foreign investors last Friday (07/06) and Monday (10/06).