Facing ‘huge’ revenue pressure, Indonesia to overshoot fiscal deficit target

JAKARTA (Reuters) – Indonesia’s state revenue is under “huge pressure” this year, pushing the 2019 budget deficit wider than initially planned, Finance Minister Sri Mulyani Indrawati said on Thursday.

Officials have previously warned that weak tax collection might mean the 2019 fiscal deficit would be “slightly” above the latest estimate of 1.93% of gross domestic product (GDP).

“We are managing the 2019 state budget because pressure on the revenue side is huge in the current economic situation,” Indrawati told reporters after attending President Joko Widodo’s first cabinet meeting, adding that she had issued a decree to allow an increase in deficit financing.

“Our economic players, especially in manufacturing, are under pressure, mining is down drastically,” she said.

Indrawati did not provide a new deficit estimate, but she said the additional financing “may not be too big”, and would be covered by bond issuances on domestic and international markets.

Indonesia is currently marketing a $2.1 billion equivalent global bond denominated in the U.S. dollar and euro, taking advantage improving market conditions, IFR reported.

Indrawati declined to comment specifically on the bond sale, but said: “Interest rates are low internationally. This will provide an opportunity for us to search for the best financing (instrument).”

The president officially began his second five-year term last Sunday and ministers in his new cabinet were inducted on Wednesday. Widodo ordered them to simplify Indonesia’s regulatory framework within their first month in office, and give priority to creating jobs.