State spending cut not to give negative sentiment: BI

Bank Indonesia (BI) Governor Agus Martowardojo is convinced that a Rp133.8 trillion state spending cut in the revised 2016 state budget will neither become a boomerang nor give a negative sentiment to the financial market.

Instead, the state spending cut may ease pressure on the government to achieve the tax receipt target of Rp1,539 trillion, he said here on Tuesday.

This way the government can minimize loan needs to offset a shortage of state revenues and plug budget deficit, he added.

“Hopefully, the cut will not affect strategic spending and will continue to help the economy,” he said.

The central bank must realize the governments policy to slash the budget again as it will find it hard to achieve the target of tax receipts amidst global economic downturn, he said.

Likewise the government needs to keep the budget deficit at less than 3 percent of the national gross domestic product (GDP), he said.

He said the plan to slash state spending unveiled by Finance Minister Sri Mulyani has created a positive sentiment toward the rupiahs exchange rate against the US dollars in the past few days.

According to Jakarta Interbank Spot Dollar Rate (Jisdor), the rupiah traded at Rp13,133 per dollar on Tuesday compared to Rp13,144 per dollar the day before.

The BI governor predicted the state spending cut will have no significant impact on the economic growth, adding that the national economy will grow 5.1 percent this year.

Source: Antara News