Bambang Brodjonegoro: When China's economy slowdown, we get hit  

TEMPO.CO, Jakarta - With the end of Ramadan fast approaching, Bambang Brodjonegoro's busy schedule has just begun. His days are filled with one ministerial meeting after another. He must also keep monitoring two legislative bills currently being discussed by the House of Representatives (DPR) to ensure that they are passed by the end of the month as scheduled. One bill concerns the revised state budget (RAPBN-P) and the other is on the tax amnesty.

The revised state budget will be slashed by Rp 90 trillion to account for declining revenues. Another way of addressing the shortfall is through tax amnesty, which is expected to bring additional revenues of up to Rp 165 trillion. Bambang sincerely hopes the DPR will enact the two legislations. "The government's program, including the revised state budget, should be backed by the parties claiming to support the government," said Bambang.

He said the government revised the 2016 state budget because a number of changed macroeconomic assumptions, like economic growth, the inflation rate and the rupiah exchange rate, were judged to be irrelevant. "There's been a decline in revenues, specifically from the oil and gas sector," Bambang explained.

The finance minister met with Tempo reporters Tika Primandari, Andi Ibnu, Agus Supriyanto and Sapto Yunus at his office two weeks ago. Excerpts of the interview:

Why do we need a revised budget? What went wrong? 

The assumptions changed, leading to a decline in revenues, specifically from the oil and gas sector, in the amount of Rp90 trillion. To cover (the shortfall), we proposed a revised state budget with a reduction in the budgets of the central and regional governments and a widening of the deficit.

Was it necessary to cut the budgets of education and health?

That's the logical consequence, because education gets 20 percent of the total budget. If the budget declines, those areas will, too. But the cutbacks are only in the (central government's) because the 20 percent that's allocated to education actually goes to the regions, which manage schools from elementary to the higher levels. What is often forgotten is that there is also religious education, which is managed by the central government. When there is a cutback, we are unlikely to reduce general allocations for the regions because they are also having problems with their budgets. It's the same with the health sector, which has been cut by 5 percent. (The government allocated 5.05 percent of the 2016 state budget to health expenditures-Ed.)

Will subsidies be withdrawn?

No, these cutbacks only cover ministerial and institutional budgets. The education ministry is only cutting back social aid that is managed by the regional administrations.

What steps will the government take to anticipate a rise in the poverty rate? 

The cutbacks will not affect priority budgets. The first to be cut will be operational budgets, like official spending, acquisitions, meetings, seminars, TV ads, which we can do without. Even if we had such a budget, it would be classified as non-priority, like office buildings, which the President had long asked for.

Will fuel subsidies be cut back, too? Don't they fall under the priority category? 

That doesn't fall under the government budget. That's pure policy.

Will the cutbacks cover the revenue shortfall?

Rp 90 trillion will be covered by the cutbacks at the central and regional administrations and a widening of the deficit. Yes, tax revenues have gone down and that's why we're really trying to pass the revised state budget and the tax amnesty bills.

Will the loans increase?

We are widening the deficit from 2.1 percent to 2.48 percent by increasing our loans. There's an additional Rp40 trillion and Rp19 trillion from last year's surplus and Rp21 trillion from our bonds. This is why the tax amnesty is important to protect revenues.

Why has economic growth been revised down from 5.3 percent to 5.1 percent?

It's more realistic. Two factors ensure the flow of economic growth: exports and investments. If global demands decline, attracting investment would be difficult. Only government operations would proceed. Moreover, there are currently many global issues: one that can have an impact (on our economy) is the decline of China's revenues.

Will China's slower economic growth really have an impact on Indonesia?

Very much. First, because of its slow growth, and secondly because the price of commodities has gone down. This is what hit us. China is one of our most important exporting countries. On the whole, ASEAN is actually the biggest exporter of our goods, but country-wise, it's China.

In the meantime, will government employees still get their 13th-month salary (THR) on Idul Fitri?

This will be the first time government employees get their THR. It will be paid before Lebaran (Idul Fitri), middle of this month. Then they get their 13th-month salary, which they will get-at the latest-before the start of the new school year. That's what we have budgeted.

The tax amnesty has been included in the revised state budget, although its deliberation is not final yet. 

That's why we're attempting to have both the revised state budget and the tax amnesty enacted at the same time.

Their dissemination and clarification will follow because many people already understand it anyway. Those who are making loud noises are people who don't understand it.

Isn't the Rp165 trillion target from the tax amnesty a bit ambitious? 

That's if we take the average rate of expatriate revenues (taxes from overseas accounts), at two percent and four percent (of declared incomes and assets overseas). We figure Rp 1 quadrillion times two percent can get us Rp 20 trillion. Then from the 4 percent of declared incomes, we estimate we can get Rp 180 trillion. We'll be happy if we can get Rp 165 trillion. (*)

Read the full interview in this week's edition of Tempo English Edition