As per January 2014, revenue and grant realization had reached 5.5% of the target of IDR 1,667.1 trillion set in the state budget 2014, while government expenditure realization was 5.3%. Target of revenue and grants consist of IDR 1,665.78 trillion and IDR 1.36 trillion, in domestic revenues and grants, respectively. To date, tax revenues have reached 6.5% of the target set in state budget 2014 of IDR 1,280.4 trillion, were just 2% of the target of IDR 385.4 trillion. Total government expenditure in state budget 2014, is set at IDR 1,842.5 trillion, which comprise IDR 1,249.9 trillion in central government expenditure and IDR 592.6 trillion in regional government transfer. By January 2014, realized central government expenditure has reached 3.2%, while transfer local governments was 9.6%. Debt repayment and social contributions constitute the largest percentage of realized government expenditure, registering 10.8% and 10.1%, respectively.
Figure 7: Government Revenue & Grant and Expenditure Realization as per January 2014 (%)
Revenue and grant realization is 5.5%, whereas expenditure is 5.3%
Source: Ministry of Finance (2014)
Transfer to the regions, includes funds transferred within the framework of special autonomy and adjustment which in the 2014 annual budget registered an increase of 24.8% compared with the previous year. In fact the percentage of funds transferred within the framework of special autonomy and adjustment to the total funds transferred to the regions, increased by 17.66%. One of the new developments, is the budget allocation of IDR 520 billion for special administration purposes, which was officially earmarked for Yogyakarta special administrative region (DIY). Nonetheless, compared with the budget allocation for other special autonomy in the country, the amount allocated for DIY is still very small.
Figure 8: Special Autonomy and Adjustment Fund (IDR trillion)
Special autonomy and adjustment fund increased by 24.8% in 2014 (y-o-y); DIY received IDR 520 billion in special autonomy funds
Source: Directorate General of Budgeting and CEIC (2014, processed)
The government still relies heavily on tax revenues to pay for government expenditure. Over the last three years, tax revenues have contributed more than 75% of government revenues. In other words, despite the fact that the contribution of tax revenues to the national budget shows a downward trend, realized tax revenues continue to be an important component that supports fiscal policy sustainability.
Figure 9: Tax Revenue Target and Percentage of Tax in the State Budgets 2012-2014
Despite retaining its importance as the main source of government revenue, the role of tax revenues in the annual budget shows a slight decline over time
Source: Directorate General of Budgeting and CEIC (2014, processed)
In an attempt to ensure that the target set for tax revenue is achieved, the Directorate General of taxation has put in place optimization efforts. The steps have been translated into six strategic programs: (i) improving tax administration system; (ii) expansion of tax eligible individuals; (iii) expansion of tax base, including small and medium size enterprises (SMEs); (iv) optimizing the use of data and information from other institutions; (v) strengthening law enforcement for tax evaders; and (vi) improving tax regulations through the formation of the harmonization team.
Besides, other programs to increase tax revenues which are still in the works include the intensification of financial tax and setting final tax rate. The idea of intensifying financial tax entails the imposition of tax on monetary transactions such as stocks/shares, bonds, and futures. The reason for that is that the financial sector generates a lot of profits, and the financial sector was a beneficiary to government bailouts during the financial crisis. Meanwhile, setting final tax rates, is one of the solutions for increasing the effectiveness of self-assessment system without increasing the number of tax officials.
In general, Indonesian total external debt increased, with private sector debt contributing most to the gain. The ratio of private external debt to total external debt reach 53.21%, while the ratio of government and Bank Indonesia external debt to total external debt was 46.79%. Indonesian total external debt in December 2013 raised by USD 2.6 billion to USD 264.06 billion compared to the position in November 2013 (an increase of 1%); increased by USD 12.6 billion (5%) from the position in January 2013 and USD 11.17 billion (4.6%) compared to the position in December 2012. Meanwhile, private external debt in December 2013 increased by USD 2.3 billion to USD 140.5 billion compared to the position in November 2013 (an increase of 2%).
Figure 10: Government and Private Sector External Debt, September 2011 – December 2013 (USD billion)
Private sector external debt increased
Source: The Ministry of Finance and CEIC (2014)
Government external debt in December 2013 increased by USD 212 million to USD 114.29 billion compared to the position in November 2013 which gain 0.2%. It was decreased by USD 914 million (-1%) compared to the position in January 2013 and USD 1.8 billion (-1.6%) compared to the position in December 2012. Short-term private external debt by original maturity in December 2013 increased by USD 1.9 billion to USD 40.67 billion compared to the position in November 2013 (an increase of 4.9%). The increase continued in January 2013, when short-term private external debt shot up by USD 4.84 billion (14%) compared to the position in January 2013 and USD 3.8 billion (1.04%) compared to the position in December 2012. Meanwhile, short-term private external debt by remaining maturity in December 2013 declined by USD 338 million to USD 41.159 billion compared to the position in November 2013 (a decrease of -0.8%); increased by USD 2.3 billion (6%) compared to the position in January 2013 and USD 1.09 billion (2.7%) compared to the position in December 2012.
Figure 11: Indonesia Debt Service Ratio, December 2007 – December 2013 (%)
Debt Service Ratio increased sharply
Source: Bank Indonesia and CEIC (2014)
Debt Service Ratio which shows an upward trend, rose sharply in quarter IV-2013. In the last quarter of 2013, Indonesia DSR reached 52.7%, which reflects weakening capacity of the Indonesian government to repay its debt from one quarter to the next, which in turn has stoked up risk for the Indonesian economy.
Figure 12: Foreign Ownership of Securities, October 2011 – January 2014 (IDR trillion)
Foreign ownership of Indonesian securities increased
Source: Ministry of Finance, Bank Indonesia, OJK, and CEIC (2014)
Foreign ownership of securities increased. Foreign ownership of government bonds in January 2014 raised by IDR 4.8 trillion to IDR 328.65 trillion compared to the position in December 2013, and increased by IDR 55.45 trillion compared to the position in January 2013. This followed the issuing of Global Bonds in January 2014. Meanwhile, foreign ownership of equity in December 2013 stood at IDR 1,475.45 trillion, and increased to IDR 1.7 trillion compared to the position in November 2013. However, it suffered a sharp decline of IDR 87.4 trillion compared to the position in January 2013 and IDR 71.6 trillion compared to December 2012. Foreign ownership of Bank Indonesia Certificates (SBI) increased by IDR 3.9 trillion in January 2014, and increased by IDR 180 billion compared to the position in December 2013 and increased by IDR 3.7 trillion compared to the position in January 2013.
Figure 13: Composition of Government Securities, 2011 – February 2014 (IDR trillion)
Government securities outstanding declined slightly
Source: DMO Ministry of Finance and CEIC (2014)
In an attempt to increase funds required to meet domestic expenditure, the Ministry of Finance issued IDR 50.5 trillion in Global Bonds in January 2014. The increase initially led to a rise in the level of outstanding government securities in January 2014. However, total government securities (SBN) in February 2014, decreased by IDR 3.45 trillion from the January 2014 level to IDR 1,459.29 trillion, which represented an increase of IDR 339.22 trillion from the level in February 2013 (see Fig. 13). Interest on fixed bonds registered an increase of IDR 22.25 trillion to IDR 793.07 trillion and increased by IDR 153.47 trillion from February 2014. Government sharia bonds declined by IDR 5.98 trillion to IDR 77.15 trillion from January 2014, and increased by IDR 4.63 trillion from February 2014. In February, 2014, government bonds denominated in foreign currency, registered a decline of IDR 21.72 trillion to IDR 428.26 trillion compared with the position in January 2014, which however represented an increase of IDR 164.57 trillion for the position in February 2013. The increase affected government treasuries that shot up by IDR 2 trillion from the position in January 2014 to IDR 38.5 trillion. The increase represented an increase of IDR 16.53 trillion from the position in February 2013.