September 24, 2019 / 2:14 PM / a month ago

Indonesia sets aside $700 million as fiscal buffer in 2020 budget

JAKARTA (Reuters) - Indonesia has set aside 10 trillion rupiah ($708.72 million) as a buffer for fiscal risks next year, a 43% increase from such an allocation this year, due to global economic uncertainty, a finance ministry official said on Tuesday.

FILE PHOTO: Indonesia's Incumbent President Joko Widodo arrives for a plenary session during the 34th ASEAN Summit in Bangkok, Thailand, June 22, 2019. REUTERS/Jorge Silva

Parliament passed the government’s 2020 budget of $180.3 billion earlier on Tuesday with a fiscal deficit 1.8% of gross domestic product, which officials have said was designed to anticipate a global economic slowdown.

The budget is President Joko Widodo’s first for his second term and already contained allocations for programs he promised when running for re-election before a presidential vote in April.

The buffer can be used if any of the government’s macroeconomic assumptions misses forecasts, affecting revenue collection or ballooning subsidies.

“If the deficit rises, we can use it to make sure it stays below 3%,” said Askolani, director general of budgeting at the ministry. By law, Indonesia’s fiscal deficit cannot be above 3% of GDP.

Askolani, who goes by one name, said the buffer could also be used if there is a change in government policy or for emergency responses to disasters.

Among approved assumptions for the budget are 5.3% economic growth, an annual average rupiah trading rate of 14,400 a dollar and a $63 per barrel annual average price for Indonesian crude oil.

In a news conference detailing the budget, finance ministry officials said 2020 allocations for infrastructure investment was 423.3 trillion rupiah, up only 2% from this year’s 415 trillion. This include a 3.5 trillion rupiah capital injection to state construction firm Hutama Karya and a 5 trillion rupiah injection to state power utility Perusahaan Listrik Negara.

Total allotted funds for 2020 social programs, which could support domestic consumption, was 372.5 trillion rupiah, the officials said.

President Widodo’s program to hand out cards to 2 million young people to obtain free skills training received a 10 trillion rupiah budget, officials said.

The government has partnered with digital unicorns such as ride-hailing and mobile payment firm Go-Jek and e-commerce Tokopedia to provide the training, they said.

Reporting by Maikel Jefriando; Writing by Gayatri Suroyo; Editing by Chizu Nomiyama

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