JAKARTA (Reuters) – Indonesia’s President-elect Prabowo Subianto is exploring ways to remove limits on the budget deficit and debt-to-GDP ratio as he seeks to fund his election pledges, investigative magazine Tempo reported this week, citing anonymous sources.
Prabowo’s fiscal adviser, Thomas Djiwandono, said he was not aware of any discussions about the budget deficit or removing the debt ceiling, adding that the president-elect remains committed to drawing up a 2025 budget within statutory fiscal limits.
“We remain committed to the plan set by President Joko Widodo for 2025,” he told Reuters, noting that next year’s budget shortfall is projected to be between 2.29 percent and 2.82 percent of GDP.
Indonesia’s National Finance Law, introduced in the aftermath of the Asian financial crisis in the late 1990s, caps the government’s annual budget deficit at 3% of gross domestic product and limits the debt-to-GDP ratio to a maximum of 60%.
Prabowo has set up a special team to consider options such as amending the law to remove financial restrictions and creating a new tax collection agency, Tempo newspaper reported, citing three sources.
The team is being overseen by former Constitutional Court chief justice Zimri Assidiki, Tempo reported.
Gimley told Reuters on Tuesday he was overseeing a team reviewing a range of laws, including the State Finance Code, but did not respond to questions about the fiscal cap.
“I am advising that the establishment of new tax authorities does not violate existing laws,” he said.
Mr. Prabowo’s plans for increased spending in Southeast Asia’s largest economy are already spooking debt and currency markets, with some economists warning of growing fiscal risks under a new government that has pledged to boost economic growth to 8 percent from about 5 percent now.
The rupiah hit a four-year low last month after reports that President-elect Prabowo plans to gradually raise the debt-to-GDP ratio to 50 percent from less than 40 percent now, a plan his economic team denies.
(1 dollar = 16,292.0000 rupiah)
