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The 2020 State Budget Financing Strategy Must Be Opportunistic, Measurable, and Prudent

Jakarta, 24/07/2020 Ministry of Finance - Director General of Directorate General of Budget Financing and Risk Management of the Ministry of Finance (DJPPR Kemenkeu) Luky Alfirman explained the financing strategy to cover the 2020 State Budget deficit which responded countercyclically to the impact of the Covid-19 pandemic with a deficit of 6.34% to GDP or a total of Rp1,039.2 trillion in Presidential Regulation (Perpres) No.72/2020. He emphasized that the method must be done in an opportunistic, measured, and prudent manner.

"Our big strategy objectives are opportunistic, looking at opportunities, situaation in the market, but measurable and prudent. We want to find financing that is as cheap as possible in terms of cost of funds, managing the risk, for example by adjusting the maturity profile and currency or current series. Then look at the need for funding the State Budget itself. Target deficit," in Our Dialogue:  Development of the 2020 State Budget Financing July 2020 edition virtually on Friday (24/07) in Jakarta.

Therefore, the government took non-debt and debt financing sources. In non-debt financing, the government utilizes the Accumulated Budget Surplus (SAL), government endowments and funds sourced from the Public Service Agency (BLU).

For debt financing, the government draws program loans from bilateral and multilateral institutions such as the World Bank, ADB, AFD, KfW, JICA, ECDF, and AIIB with relatively low interest rates.

 

"The withdrawal of program loans, both bilateral and multilateral, the World Bank, ADB, and so on," he explained.

In addition, the government also issues Government Securities (SBN) on the domestic market, SBN in foreign currency. Bank Indonesia (BI) lowered the reserve requirement (Giro Wajib Minimum) and increased Macroprudential Liquidity Buffer (Penyangga Likuiditas Makroprudensial / PLM), the Ministry of Finance and BI also carried out burden sharing scheme where BI could increase banking liquidity in the SBN primary market for banks that restructured their MSME customer loans. The government can issue SBNs to finance the National Economic Recovery (PEN) program which can be purchased by BI (repo). Currently, a Joint Decree (SKB) has been issued between BI and the Ministry of Finance, consisting of SKB I and SKB II.

"One of our extra ordinary policies, BI can buy SBN on the primary market. Then we make two Joint Decree (SKB), the first SKB, the second SKB," he concluded. (nr / ds)