NEWS

The State Budget (APBN) is an instrument owned by the government to influence the economic cycle. According to Musgrave (1989), the state budget plays a role in three things, namely allocation, distribution, and stabilization.

Indonesia's success through the pressures of the global financial crisis in 2008 and can grow positively in 2009, when the entire global region experienced a contraction, can not be separated from the ability of the government at that time to play the role of the APBN, especially in influencing purchasing power (consumption) to keep growing. However, consumption which is the main engine of growth must continue to perform well, especially when a crisis occurs.

That is why the role of the 2016 State Budget is highly anticipated for its breakthrough, especially in mitigating the impact of external uncertainties and at the same time stimulating the engine of growth. It must be admitted that the pressure that has occurred on the engine of growth this year cannot be separated from the non-optimal role of the APBN.

2016 State Budget Posture

Basic macroeconomic assumptions in the 2016 State Budget, namely economic growth at 5.3%, inflation at 4.7%, 3-month SPN at 5.5%, the rupiah exchange rate at Rp. 13900 / US dollar, ICP at the level $ 50 / barrel, lifting oil by 830 thousand barrels per day (BPD), and lifting gas by 1155 thousand barrels of oil equivalent per day.

There is also, the state budget posture is a total revenue of Rp 1820.5 trillion (up 3.34% from the 2015 Revised State Budget). This revenue will be obtained from taxation revenues of Rp. 1546.66 trillion (up 3.86% from the 2015 APBN-P) and Non-Tax State Revenues (PNBP) of Rp. 124.9 trillion (down by 54% from the 2015 APBN-P ).

While total expenditure reached Rp 2095.72 trillion (an increase of 5.63% from the 2015 Revised Budget). This expenditure will be allocated for central government expenditure in the amount of IDR 1325.55 trillion (up 0.45% of the 2015 APBN-P) and regional and village transfer fund allocation in the amount of IDR 770.17 (up by 15.88% from the APBN-P 2015)

With a posture like this, the 2016 State Budget will still experience a primary balance deficit (the amount of expenditure is greater than receipts outside debt payments) of Rp 88.24 trillion. This deficit value increased from the 2015 APBN-P of Rp 66.8 trillion. This trend has occurred since 2012. One of the causes is the continued waste of spending on bureaucracy and goods.

So, with this design, the secondary deficit will be Rp 273.18 trillion (2.15% of GDP), up from the 2015 APBN-P of Rp 225.1 trillion (1.9% of GDP). Funding of IDR 273.18 trillion is needed to cover this deficit. In other words, the government still cannot escape from the pressure of debt. And until September 2015, the total outstanding value of government debt reached IDR 3091 trillion (24.7% of GDP).

Change

If examined further, there are some changes that occur in this 2016 APBN compared to the previous APBN. First, an increase in allocations for infrastructure spending to IDR 303.3 trillion, up 8.3% from the 2015 APBN-P of IDR 280 trillion.

Although not yet spending can reach above 5% of GDP, like some other countries in Asia. However, this should be appreciated. This gives a signal that the government remains committed to catch up with infrastructure development.

It must be admitted that the poor condition of infrastructure is one of the factors that makes domestic economic competitiveness low. This is reflected in the global competitiveness index released by the World Economic Forum (WEF) 2015-2016, which places Indonesia in 37th position or down 3 steps from 2014-2015. Indonesia ranks behind Singapore (2), Malaysia (18), China (28) and Thailand (32).

Therefore, with this large allocation of infrastructure spending, the government must ensure that this is fully absorbed. This absorption problem makes it difficult to accelerate the construction of infrastructure.

Second, the increased allocation of regional and village transfer funds which reached 770.17 trillion. And only this year, the allocation of funds for regions above the spending of ministries and institutions.

This is a form of the government's Nawa Cita's commitment to develop Indonesia from the periphery by strengthening regions and villages within the framework of the Unitary Republic of Indonesia.

Even so, the government must ensure that large funds can be well managed. It must be recognized that only a small number of regions/villages can maximize this budget allocation to develop a productive sector that can have a multiplier effect on the regional economy.

Conversely, these large funds are parked more in regional banks (BPD) to expect benefits from interest. Until September 2015, unemployed regional funds in regional banks reached Rp 290 trillion. For this reason, the mechanism of reward & punishment must be consistently implemented so that conditions like this can be minimized.

Third, the significant allocation of energy subsidies has been cut to Rp 102.08 trillion from Rp 137.82 trillion. The significant decrease in the value of subsidies cannot be separated from the reduction in subsidies for electricity from Rp. 73.15 trillion to Rp. 38.38 trillion.

As is known, for 2016, PT. The National Electricity Company (PLN) will revoke subsidies to 20 million household customers from the 450 VA and 900 VA power plants.

Revocation of this subsidy, on the one hand, will reduce the burden on the state budget and PLN can encourage profitability, so that it can be allocated for investment in power plant construction so that it can pursue growth in demand that continues to increase each year.

However, on the other hand, the removal of subsidies will add to the economic burden of the community, moreover, the 450 VA and 900 groups are the lower middle class. Removing subsidies will reduce purchasing power. In fact, this year alone, people's purchasing power tends to be eroded, as a result of the elimination of gasoline subsidies and price pressures for food needs.

That is why the government must carefully measure the impact of the removal of electricity subsidies. Even though the current government is directing the APBN to be more productive, the short-term (consumption) condition should not be ignored. However, now consumption is still a pillar of growth. Of course, an indicator of the success of the government in playing the role of the state budget can be seen from whether the welfare of the community has improved or vice versa.

Written by: Desmon Silitonga-Analyst PT. Capital Asset Management