Indonesia proposes to raise 2017 budget deficit to close to legal limit

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Illustration photo of an Indonesia Rupiah note

JAKARTA (Reuters) – Indonesia’s government has proposed to parliament to hike 2017 spending and cut the revenue target, resulting in a wider budget deficit that almost reaches the legal limit, according to a government document.

By Indonesian law, the combined budget deficits of the central and regional governments in one year could not exceed 3 percent of gross domestic product (GDP).

The proposed revisions to the central government’s 2017 budget, released on Thursday, would create a fiscal deficit of 2.92 percent, a finance ministry document showed.

However, the ministry said the revisions do not mean the 3 percent legal limit might be breached, as traditionally not all of the approved budget is spent.

In the ministry’s view, this year’s fiscal deficit will be 2.67 percent of GDP. That’s above the original budget projection of 2.41 percent, but well below 3 percent.

The documents showed the ministry expects a shortfall of 36.16 trillion rupiah ($2.70 billion) in 2017 total revenue, due to less-than-initially-expected tax receipts. That would reduce the total revenue to 1,714.13 trillion rupiah.

The government plans to increase spending by 30.91 trillion rupiah, which would lift total budgeted spending to 2,111.36 trillion rupiah.

Included in the proposed extra spending are bigger allocations for connectivity infrastructure, improvement of prisons and preparations for the 2018 Asian Games, which Indonesia will host.

The government also proposed a 33.4 percent increase in energy subsidies to 103.11 trillion rupiah, due to higher global oil prices.

The proposed changes need to be approved by parliament, which will have deliberations about them with the government.

(Reporting by Gayatri Suroyo; Editing by Richard Borsuk)

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