State budget to absorb risk from Russia-Ukraine conflict: Minister

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The state budget will continue to absorb risks from the turmoil caused by the spread of the pandemic and geopolitical conflicts between Russia and Ukraine, Finance Minister Sri Mulyani Indrawati stated.

“Various dynamics will continue to occur and the state budget will be the main instrument for absorbing risks from each turbulence,” Indrawati noted at the KiTA State Budget Press Conference in Jakarta, Monday.

In 2022, the geopolitical conditions, especially the conflict between Russia and Ukraine, have brought risks different from those arising due to the COVID-19 pandemic in 2020 and 2021, she pointed out.

This conflict has an indirect impact on the increase in the global commodity prices, especially food and energy commodity prices, which affected the prices of other commodities, Indrawati noted.

“This has pushed up inflation in developed countries, especially in Europe and the United States, which experienced very high price hikes, and it then led to a quite drastic tightening policy response,” the minister remarked.

The Federal Reserve (The Fed), the US Central Bank, announced it would increase its benchmark interest rate up to seven times throughout 2022 and start reducing its quantitative easing policy.

Indrawati addressed that the United States’ policy had an impact on the decline in yield and price of Indonesian securities. However, the minister said she will take appropriate steps to anticipate the risk of changes in future.

“We have to look at two aspects, the increase in interest rates themselves and the price of securities that will experience further pressure due to capital outflows. We must be aware of debt management and especially in financing,” she emphasized.

The minister noted that the performance and resilience of Indonesian securities remained good despite experiencing shocks in the form of capital outflows.

“We will continue to maintain this because in future, the condition will not get better. However, we will witness shocks that we will continue to anticipate,” she stated.

Source: Antara News