Important Points to Know about Indonesia’s 2021 State Budget

2021 state budget of Indonesia was approved on September 29, 2020, at the 6th House of Representatives Plenary Session. The purposes of 2021 Indonesia’s State Budget are four-fold.

First of all, the government targets to speed up the country’s national economic recovery caused by the coronavirus pandemic.

Secondly, the governmental administration led by President Jokowi wants to encourage structural reform in the country. Only effective structural reform will enable Indonesia to augment its innovation, increase its productivity, and enhance economic competitiveness.

Thirdly, the government drafted the latest state budget to accelerate the economic transformation in the direction of digitalisation.

Last but not least, the Indonesian government wishes to capitalise on and anticipate changes in demographics.

According to Indonesia’s State Budget State 2021, the allocated amount is IDR 1,743.6 trillion and it will come from about IDR 1,444.5 trillion of tax revenues and IDR 298.2 trillion of non-tax state revenues.

Currently, the state revenue target seems to be encountering much greater challenges due to the current COVID-19 crisis that is affecting the business environment. However, the government still plans to carry out 2021 Indonesia’s state budget with 2020’s baseline and their maximum efforts.

For state expenditure in the 2021 Indonesia’s State Budget, it will be IDR 2,750.0 trillion. This amount is earmarked via the Central Government Expenditures of IDR 1,954.5 trillion and the Transfers to Regions and Village Funds amounting to IDR 795.5 trillion.

Important Points to Know About Indonesia’s 2021 State Budget

1. Proposal for Growth Target

The Indonesian government targets a GDP growth of 4.5% to 5.5% in 2021. To realise this projection, the government plans to invest IDR 1.4 quadrillion in the second half of 2021 to boost the country’s economy.

2. Higher Tax Revenue

The government in Indonesia expects to collect approximately IDR 1.48 quadrillion of tax revenue in 2021 with a growth of 5.5% to support economic recovery. The total tax revenue to be collected included tax income of IDR 1.27 quadrillion and customs revenue of IDR 213.4 trillion.

3. Continuous Priority Programs

The Indonesian government is planning to spend about IDR 2.74 quadrillion in priority programs to achieve 2021’s development target: IDR 1.95 quadrillion of which will be set aside for the central government and IDR 796.3 trillion will be allocated for village funds and regional transfers.

To dissect more specifically, IDR 169.7 trillion is earmarked for the healthcare sector, 20% of IDR 549.5 trillion for pre-employment and vocational cards, IDR 414 trillion for Indonesia’s infrastructure development, IDR 30.5 trillion for ICT development, IDR 419.3 trillion for social protection programs, IDR 104.2 trillion for food security, IDR 356.5 trillion for stimulus spending, and IDR 14.4 trillion for tourist destination development.

4. Indonesia’s Budget Deficit

A budget deficit above 3% will be continued in 2021 to boost the stagnant economy due to the pandemic. The government aims to release more global bonds, sovereign debt papers, shariah-compliant bonds, and retail bonds to support the deficit, as well as working with Bank Indonesia and the central bank.

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