JAKARTA, June 14 (Reuters) - Indonesia’s fiscal deficit target has been narrowed to 2.4 percent of gross domestic product (GDP) in a revision of the 2014 budget approved by a committee late on Friday, the finance minister said, from 2.51 percent proposed earlier.
The deficit figure is 42 percent higher than the 1.69 percent fiscal deficit targeted in the original 2014 budget for Southeast Asia’s largest economy.
The adjustments are needed to account for changes to Indonesia’s macroeconomic assumptions - specifically a slower growth forecast, lower crude oil output and weaker rupiah exchange rate that has faced pressure from a yawning trade deficit and current account.
The deficit has declined to 241.49 trillion rupiah ($20.48 billion) from a 251.72 trillion rupiah forecast, Finance Minister Chatib Basri said.
The latest figure is 38 percent higher than the deficit of 175.4 trillion rupiah set in the original 2014 budget.
“The decline primarily stems from a reduction of the total government bonds to 264 trillion (rupiah) from 274 trillion (rupiah),” Basri told parliament referring to government obligations in a draft revision.
“As a result the spending cuts by other ministries targeted at 100 trillion in the revised state budget have now been reduced to 43.025 trillion (rupiah) or a reduction in ministry spending of 56.97 trillion (rupiah).”
By law, the deficit must not exceed 3 percent. Parliament is expected to sign off on the revised budget soon.
Earlier, President Susilo Bambang Yudhoyono had decided to cut the budget by 100 trillion rupiah, Basri said.
Indonesia’s fuel subsidy spending has increased 17 percent to 246.49 trillion rupiah in the revised budget from 210.74 trillion rupiah in the original, Basri said.
The total electricity subsidy spending in the revised budget has increased 45 percent to 103.82 trillion rupiah from 71.36 trillion rupiah, he added.
“This increase is a result of a change in the exchange rate that has been pegged at 11,600 (per U.S. dollar) and a decline in (targeted) crude oil production from 870,000 barrels per day (bpd) to 818,000 bpd,” Basri said.
The latest economic assumptions included in the revised 2014 budget forecast growth this year at 5.5 percent, budget committee chairman Ahmadi Supit told parliament, down from 6 percent in the original. Inflation is seen at 5.3 percent, below the 5.5 percent originally forecast.
The rupiah rate assumption of 11,600 per dollar “is still realistic,” central bank governor Agus Martowardojo told lawmakers. The original budget had pegged the rupiah at 10,500.
“What needs to be noted are the government’s efforts to control the current account deficit. If possible exports will be protected so they improve and imports can be tightened,” Martowardojo said.
“Exports are a challenge for the government remembering that there is still pressure on commodity prices. What’s more, mineral exports are still being hindered by the law on coal and minerals,” he said.
Crude oil prices are expected to remain at $105 per barrel, while gas output is seen at 1.224 million barrels of oil equivalent per day (boepd), down from 1.24 million boepd in the original budget. ($1 = 11790 rupiah) (Writing by Fergus Jensen; Editing by Robert Birsel)