Indonesia planning to relax budget deficit limit amidst Coronavirus pandemic

The coronavirus outbreak has claimed the lives of more than 37,000 people around the world while infecting over 600,000

Indonesia is planning to issue an emergency regulation for allowing the government to manage a wider fiscal deficit and also raise the spending in order to tackle the coronavirus or COVID-19 outbreak, in a move that will be effective in revising the state finances law, a minster stated on Tuesday.

The state finances law of 2003 caps the budget deficit at a maximum of three percent of the gross domestic product for the fiscal year. The new rules will be allowing the government to go past the limit fo three fiscal years consecutively, but the cap will then be reinstated in 2023, Luhut Pandjaitan, who is a senior minister responsible for overseeing the investment and natural resources stated in a video statement.

Indonesia recorded first coronavirus cases on March 2

Image for Representational purpose only

Indonesia recorded its first coronavirus cases on March 2 and has seen numbers climb to 1,414 infections and 122 deaths as of Monday. Some provinces and cities have shut schools and ordered residents to stay at home. Jakarta Governor Anies Baswedan on Monday told Reuters he had asked President Joko Widodo to approve a regional quarantine, "effectively a lockdown", in the capital due to reports that even more people had died of an unspecified contagious disease.

Pandjaitan said the Jakarta governor and Finance Minister Sri Mulyani Indrawati had discussed budgetary needs in preparation in case the capital goes into a quarantine. Relaxing the budget deficit limit would accommodate spending in support of such a decision, such as a cash transfer to 20 percent or 40 percent of the poorest in the population, he said. The president will decide on calls for regional quarantine this week, Pandjaitan said.

Indrawati previously identified 62.3 trillion rupiah ($3.78 billion) of spending in the 2020 budget that could be redirected to the COVID-19 response and called on regional governments to shift their budgets for healthcare. Her latest outlook for the 2020 budget deficit was 2.5 percent of GDP. The planned emergency regulation, called "a regulation in lieu of law", can be made effective immediately, but must be approved by parliament in its next session. A key parliamentary committee had already endorsed such move.

(With agency inputs)

Related topics : Coronavirus