Late on Friday evening (30/10), after 11 hours of discussion, Indonesia's House of Representatives (DPR) approved the 2016 State Budget. This is good news for the government as it now has the opportunity to reform fiscal policy and continue with its development programs. The government budget deficit is expected to rise to 2.15 percent of the country's gross domestic product (from 1.9 percent of GDP in the revised 2015 edition), a bit closer to the maximum three-percent-of-GDP rule that is allowed by Indonesian law.
Indonesian Finance Minister Bambang Brodjonegoro is content seeing the 2016 state budget being approved just before the deadline as the government can now focus on national priority programs, including infrastructure development, food security and the structural reform program (known as Nawacita).
Total state revenue is projected at IDR 1,822.7 trillion, while total government spending was agreed at IDR 2,095.7 trillion (20 percent of which is allocated to education and 5 percent to health).
A lengthy debate was needed in the DPR as not all House members agreed with the government's proposal to inject IDR 48.4 trillion into state-owned enterprises for further business expansion. Some suggested these funds should be spent on infrastructure development or food security. However, Brodjonegoro said the government is to postpone a financial injection into 24 state-controlled entities until at least the middle of next year.
The 2016 State Budget sets a GDP growth target of 5.3 percent (y/y), a rupiah at IDR 13,900 per US dollar, inflation at 4.7 percent (y/y), an oil lifting target at 830,000 barrels per day (bpd).