A. Developments in Fiscal Sector
The decline in economic growth has had adverse effect on tax revenues. Indonesian economic growth declined in 2013. On y-o-y basis, the economy posted growth of 6.05%, 5,83%, 5.62%, in quarter I, quarter II, and III, 2013, respectively, which was lower than 6.2% projected in the revised state budget assumption for 2013 (APBN-P 2013). Consequently, tax revenues declined.
Tax revenues are still below target. Nonetheless, if compared with the same period in 2012, (y-o-y), tax revenues registered an increase of 7.72%. Based on data from the Directorate General of Treasury, by October 31, 2013, tax revenues had reached IDR 634.6 trillion, which is 71.75% of the target set in the APBN-P 2013. To that end, lower than planned target tax revenues will complicate government efforts to achieve the target for the budget year by end of the year.
Table 1: Tax Revenues for January 1-October 31, 2013
Two months remain before the fiscal year comes to a close, but realized tax revenues still hover around 71.75% of the target set in APBN-P 2013.
Source: Ministry of Finance (2013)
State expenditure realization during the second period of SBY administration has showed a downward trend. Since 2010, state expenditure realization has consistently been below 90%. However, if state expenditure realization reaches 95% – 96% as estimated by Ministry of Finance, then 2013 will be different from previous years. State expenditure realization or budget disbursement by October 2013 was 71.7%. Though it is higher than that achieved in previous it, it is still below the target of 83.21% set by the Evaluation and Supervision Team for Budget Disbursement (TEPPA). This is an indication that a repeat of budget expenditure toward the end of the year will be unavoidable. As a comparison budget realization in December 2012 was 18.57%, resulting in total disbursement in the end of the year reached 85.62%.
Figure 10: State Expenditure Realization over the last 5 years
Since 2009, state expenditure realization has shown a downward trend
Source: Ministry of Finance and Task Force and the Presidential Delivery Unit for Development Monitoring and Oversight (UKP4) (2013)
Deliberations of state budget for fiscal 2014 have been completed, leading to its approval. The state budget (APBN) of 2014 is IDR 1,842 trillion. In the meantime, the estimated state income are IDR 1,667.14 trillion, which implies that the budget has a deficit of IDR 175.3 trillion or 1.69% of GDP. The following depicts assumptions in the state budget of 2014.
Table 2: Comparison of Macroeconomic Assumptions in APBN 2013, APBN-P 2013, RAPBN 2014 and APBN 2014
Economic growth in state budget of 2014 is lower than revised state budget of 2013
Source: Ministry of Finance and Tempo (25/10/2013)
Table 3: Budget Deficit within APBN-P 2013, RAPBN 2014, and APBN 2014 (IDR Trillion)
APBN 2014 has a deficit of 1.69% of GDP
Source: Ministry of Finance (2013) and Jurnas (25/10/2013)
The implication of a lower economic growth is that budget deficit for 2014 is also smaller. In the APBN 2014, the budget deficit is set to be IDR 175.4 trillion, which represents 1.69% of GDP, and is smaller than IDR 224.2 trillion in the APBN-P 2013. However, deficit in APBN 2014 that amounted for IDR 154.2 trillion or equivalent to 1.49% of GDP is larger than deficit proposed in RAPBN 2014.
B. Developments in the Government debt and Foreign Debt
As by October 2013, the total value of government securities (SBN) outstanding was IDR 1 351.12 trillion, an increase of IDR 28.69 trillion compared with IDR 1 322.42 trillion outstanding by September 2013. The composition of SBN outstanding for October 2013 consisted of fixed rate bonds of IDR 739.01 trillion. Meanwhile, the value of treasury bills by October 2013, was IDR 34.4 trillion, which was lower by IDR 0.2 trillion than IDR 34.6 trillion recorded in the previous month. In the meantime, the variable rate bond remained unchanged during the January 2013-October 2013 period (IDR 122.754 trillion). On the other hand, the level of Government Islamic Securities was IDR 87.87 trillion by October 2013, which was increase of IDR 184 billion from the level in September 2013. This amounted to an increase of IDR 24.83 trillion recorded at the beginning of the year 2013, and an increase of IDR 24.84 trillion from the level in October 2012. The foreign currency denominated securities also showed an increase. In October 2013, the value of foreign currency denominated securities was IDR 367.07 trillion, which represented an increase of IDR 12.49 trillion from the level, recorded in September 2013 and also marked an increase of IDR 102.25 trillion from the level recorded at the beginning of the year 2013. The level also represents an increase of IDR 119.05 trillion from the level posted in October 2012.
Figure 11: Composition of Government Securities, 2011- 2013*
The level of government securities outstanding shows an increase
Source: Ministry of Finance and CEIC (2013)
*= October 2011 – October 2013
The total value of foreign ownership of government securities (SBN) showed an increase of IDR 10.81 trillion from the start of 2013 until August 2013 from IDR 273.2 trillion to IDR 284.01 trillion. Meanwhile, foreign ownership of SBN posted an increase of IDR 76.33 trillion during the period from the start of the year 2013 until July 2013 to IDR 1693.2 trillion. Nonetheless, since May 2013, foreign ownership of SBN registered a decrease of IDR 18.93 trillion.
Figure 12: Foreign Ownership of Securities, 2011 – 2013*
Foreign ownership of equity declined, while foreign ownership of government bonds and Bank Indonesia certificates posted an increase.
Source: BAPEPAM, Bank Indonesia, and CEIC (2013)
*= October 2011 – October 2013
Total foreign ownership of equity, government bonds, and Bank Indonesia certificates (SBI) in general shows an upward trend. Government bonds increased from IDR 15.17 trillion to IDR 318.11 trillion in October 2013. Foreign ownership of SBI has registered an increase of IDR 4.5 trillion August 2013 to IDR 5.44 trillion in October 2013. This represented an increase of IDR 1.58 trillion from the previous month as well as increase of IDR 4.7 trillion compared with the same period in 2012 to IDR 1541.93 trillion in October 2013.
Figure 13: Debt Service Ratio, 2007 – 2013*
Debt service ratio has declined
Source: Bank Indonesia and CEIC (2013)
*= 2007:Q3 – 2013:Q3
Debt Service Ratio (DSR), which is indicator that gauges the ratio of payment of principal and interest on foreign debt over the value of exports of a given country, shows a decline. In quarter III-2013, Indonesia’s DSR was 39.1%. In general, DSR has shown an upward trend over the last few years. However, in September 2013, DSR registered a decrease compared with the level in June 2013. This is serious cause for concern if depreciation of Rupiah continues as that will increase the country’s burden in paying foreign debt.
Figure 14: Total External Debt, 2011 – 2013*
The external debt of government and private shows an upward trend
Source: Ministry of Finance and CEIC (2013)
*= September 2011 – September 2013
In general the level of Indonesian external debt shows an upward trend, especially private external debt. Total Indonesian external debt in September 2013 was USD 259.86 billion, which represents an increase of USD 2.38 billion from the level posted in the previous month, and an increase of USD 8 billion since the beginning of the year 2013, and also an increase of USD 16.21 billion from the level posted in September 2012.
Meanwhile, the private external debt in May 2012 was USD 118.48 billion, which has made it higher than government external debt since May 2012. In September 2013, private external debt was USD 136.65 billion, USD 23.06 billion higher than government external debt in September 2013 that reached USD 113.59 billion. That level of private external debt is higher than government and central bank external debt by USD 13.44 billion in September 2013, which was USD 123.21 billion.
The value of short term private external debt by original maturity is calculated from the time the obligation takes effect until maturity. In September 2013, the value of short term private external debt by original maturity was USD 40.128 billion, which represents an increase of USD 1.58 billion compared to the level registered in August 2013, and an increase of USD 3.54 billion from the level posted in September 2012. The value of private external debt by remaining maturity is the position of debt calculated by summation of short term position based on original maturity and the long term position that will be due in at most one year seen from the position in the month when reporting is done. In September 2013, short term private external debt by remaining maturity was USD 43.12 billion, which represented an increase of USD 4.18 billion from the level registered in August 2013 and an increase of USD 4.9 billion compared with the level posted in September 2012.