Home Economy News Indonesia’s Prabowo is exploring ways to remove fiscal deficit ceiling, Tempo reports

Indonesia’s Prabowo is exploring ways to remove fiscal deficit ceiling, Tempo reports


JAKARTA (Reuters) – Indonesia’s incoming President Prabowo Subianto is exploring possibilities to remove the fiscal deficit and debt-to-GDP ratio ceilings, aiming to fund his campaign pledges, investigative magazine Tempo reported this week, citing unidentified sources.

Under Indonesia’s State Finance Law, introduced in the aftermath of the Asian financial crisis in the late 1990s, the government’s annual budget deficit is capped at 3% of gross domestic product and the maximum debt-to-GDP ratio is 60%.

Prabowo has set up a special team to review options to revise the laws to remove the fiscal limitations, as well as to create a new tax collection agency, according to the Tempo report, which cited three sources.

The team is being supervised by a former chief justice of the Constitutional Court, Jimly Asshiddiqie, Tempo said.

Jimly told Reuters on Tuesday he has been supervising a team to review a range of laws, including the State Finance Law, but did not respond to questions on fiscal ceilings.

“I’m giving advice … so the creation of the new tax agency would not violated any existing laws,” he said.

Prabowo’s economic team did not immediately respond to request for comment.

Prabowo’s plans to increase spending in Southeast Asia’s largest economy has already put the debt and currency markets on edge. Some economists have flagged increasing fiscal risks under the incoming administration which has promised to boost economic growth to 8%, from around 5% now.

The rupiah hit four-year lows last month following a news report that Prabowo intends to raise the debt-to-GDP ratio to 50% gradually, from under 40% now, a plan that the president-elect’s economic team has denied.

Prabowo’s team has said the next government is committed to fiscal targets set by the current government, including the 2025 fiscal deficit within the range of 2.29% to 2.82% of GDP.

($1 = 16,292.0000 rupiah)

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