JAKARTA (Reuters) – Indonesia’s President-elect Prabowo Subianto is exploring the possibility of lifting limits on the budget deficit and debt-to-GDP ratio as he seeks to fund his election pledges, investigative magazine Tempo reported this week, citing anonymous sources.
Indonesia’s National Finance Law, introduced in the aftermath of the Asian financial crisis in the late 1990s, caps the government’s annual budget deficit at 3% of gross domestic product and limits the debt-to-GDP ratio to a maximum of 60%.
Prabowo has set up a special team to consider options such as amending the law to remove financial restrictions and creating a new tax collection agency, Tempo newspaper reported, citing three sources.
The team is being overseen by former Constitutional Court chief justice Zimri Assidiki, Tempo reported.
Gimley told Reuters on Tuesday he was overseeing a team reviewing a range of laws, including the State Finance Code, but did not respond to questions about the fiscal cap.
“I am advising that the establishment of new tax authorities does not violate existing laws,” he said.
Prabowo’s economic team did not immediately respond to a request for comment.
Mr. Prabowo’s plans for increased spending in Southeast Asia’s largest economy are already spooking debt and currency markets, with some economists warning of growing fiscal risks under a new government that has pledged to boost economic growth to 8 percent from about 5 percent now.
The rupiah hit a four-year low last month after reports that President-elect Prabowo plans to gradually raise the debt-to-GDP ratio to 50 percent from less than 40 percent now, a plan his economic team denies.
Prabowo’s team has said the next government will adhere to the fiscal targets set by the current administration, including keeping the 2025 budget deficit in the range of 2.29% to 2.82% of GDP.
(1 dollar = 16,292.0000 rupiah)
(Reporting by Stefano Sulaiman; Editing by Gayatri Suroyo and Kim Coghill)
