Ministry of Finance, Republic of Indonesia

INDONESIAN BUDGET

Ministry of Finance, Republic of Indonesia

OUTLINE

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1. 2015 Indonesian Budget

2. Budget Policies

3. Current Policies

4. Future Goals

Ministry of Finance, Republic of Indonesia

2015 Indonesian Budget (Summary)

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Amount (trillion rupiah)

A. Government Revenues 1,793.6 I. Domestic Revenue 1,790.3

1. Tax Revenue 1,380.0 2. Non-tax Revenue 410.3

II. Grant Revenue 3.3

B. State Expenditures 2,039.5 I. Central Government Expenditure 1,392.4

1. Line Ministries Exepnediture 647.3 2. Non Line Ministries Expenditures 745.1

II. Transfer to Region and Rural Fund 647.0

C. Primary Balance (93.9)

D. Budget Surplus/Deficit (245.9) % Deficit to GDP

E. Financing (E.I + E.II) 245.9 I. Domestic Financing 269.7 II. Foreign Financing (23.8)

Description

Assumption: 1 US$ = Rp11.900

Ministry of Finance, Republic of Indonesia

BUDGET POLICIES

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Ministry of Finance, Republic of Indonesia

Background

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CHALLENGES:

Limited Fiscal Space

Expenditure realization is not optimum (piled up in

Q4)

Large Allocation for Subsidy

Large Allocation

for Mandatory Spending

IMPROVING THE QUALITY OF PLANNING AND STATE EXPENDITURE

Ministry of Finance, Republic of Indonesia

National Development Goals in 2015 RKP (Gov. Work Plan)

Macroeconomic Economic growth 5,8 % reduce poverty by 9-10 percent with the open

unemployment rate 5.5 to 5.7 percent

Natural Resources and Environment Electrification ratio increased to

83,18%; Energy Mix on New and Renewable

Energy (EBT) 6 %; Environmental quality index of 64.5 Establishment of wastewater

infrastructure in the 764 region

Education and Health to improve the standard of education of the

population to be 8,37 years increase health insurance participant to be

86.4 million people (PBI for 86.4 million people/dues paid by Gov./Government contribution

Transportation and Connectivity •The ratio of the national logistics costs to

GDP fell to 23.6% •Construction of a new road along 240.94

km •Construction of a new railway track and

double track railway lines along the 265 km

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Ministry of Finance, Republic of Indonesia

Controlling risk and maintaining fiscal sustainability Strategies…..

Controlling Deficit

Controlling debt ratio to GDP

1. Revenue Optimization by keeping investment climate and environmental conservation maintained;

2. Improving quality of spending through increasing productive (capital expenditure) and efficiency of material expenditure and subsidy;

3. Improving budget structure

1. Controlling debt financing in manageable level; 2. Implementing net negative flow. 3. Directing loans for productive activities.

2,21% PDB

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to encourage productivity of budget in order to increase economic capacity with controlling risk and maintain fiscal sustainability

Controlling fiscal risk

3 1. Controlling debt service ratio; 2. Maintaining fiscal buffer availability; 3. Providing measurable guarantee

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Ministry of Finance, Republic of Indonesia

CURRENT POLICIES

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Ministry of Finance, Republic of Indonesia

Price adjustment on subsidized fuel

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as of November 18th 2014, the government adjust the subsidized fuel price (Gasoline and Diesel) • Impact on 2014 economic growth Saving Rp9.4 T from fuel subsidy GDP growth q1 – q3 2014 q1: 5.21% q2: 5.12% q3: 5.01% Growth rate : q1 - q3 2014: 5.1%

Projected GDP growth in 2014 after taking into account the impact of subsidized fuel price increases and its compensation : 5.1%

• Impact on 2015 economic growth Saving Rp110.2 T from fuel subsidy.

• Impact on 2015 Inflation Inflation as the impact of increase in fuel price are expected to be distributed in 3

months, amounting to 2.52%.

Ministry of Finance, Republic of Indonesia

Reallocation of the unproductive spendings to productive spendings

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2015 Savings : Rp110.2 T

Basic Infrastructures Maritime Food security

Social Protections: Education Health Welfare

Transfer to region and rural fund Specific Allocation Fund

(mainly for irrigation) Rural fund

Reducing budget deficit

With the reallocation of spending to more productive sector/ activities, economic growth in 2015 is expected to reach 5.8%.

The fiscal space from fuel price subsidy can be utilized for funding new infrastructures and social protection programs…

Ministry of Finance, Republic of Indonesia

FUTURE GOALS

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Ministry of Finance, Republic of Indonesia 13

Increase The Budget Quality

1. Increase the budget quality a) Prioritizing the allocation of productive spending in accordance with

national priority plan; b) Redesigning subsidy policies; c) Avoiding the increase of mandatory spending; d) Accelerating the implementation of Performance Based Budgeting and

Medium Term Expenditure Framework

2. High Tax Ratio

3. Economic growth based on investment

Ministry of Finance, Republic of Indonesia

Thank You