Deficit Could Rise

Kalla: Deficit Could Rise to 3% of GDP

Vice President Jusuf Kalla claimed the budget deficit could swell to 3 percent of gross domestic product this year, as he expected tax revenue to fall an estimated Rp 100 trillion ($9.9 billion) short of the target.

“The deficit will reach almost 3 percent this year — above 2.7 percent for sure,” Kalla said on Thursday. “But it will still be lower than in the United States.”

Kalla said the 3 percent mark, the ceiling under state budgetary law, was related to the drop in tax receipts, in line with this year’s decreased growth forecast. “Automatically, the tax revenue will have to be revised down by about Rp 100 trillion,” he said.

When asked about Kalla’s remarks, Finance Minister Sri Mulyani Indrawati, the official in charge of tax collection, declined to comment. I already know what you are going to ask, and I have nothing to say,” she said when approached by reporters.

Kalla’s comments could be construed as a parting shot before he leaves office at Sri Mulyani, whom he has disagreed with in the past. The government is currently targeting a budget deficit of 2.5 percent of GDP this year, or approximately Rp 139.5 trillion.

Last month, the Finance Ministry predicted tax revenue this year would reach Rp 577.6 trillion, or 98.3 percent of its target.

Revenues for value-added taxes and sales taxes were slightly lower than previously expected.

Fauzi Ichsan, chief economist at Standard Chartered, said the doubted that this year’s deficit would be as high as Kalla had predicted. “Tax revenue may decline, but government spending is not that good either,” Fauzi said, pointing out that 2008’s leftover budgetary spending amounted to approximately Rp 51.3 trillion.