REPUBLIKA.CO.ID, JAKARTA - The Indonesian government had decided to increase the budget deficit from 175.4 trillion IDR or 1.69 percent to 251.7 trillion IDR or 2.5 percent of the Gross Domestic Product in the revised 2014 national budget.

"The decision was taken because "tax is down and economic growth is slower, while subsidy is increasing," Minister of Finance Chatib Basri said on Tuesday.

He added that as part of efforts to maintain the deficit at 2.5 percent, the government would conduct fiscal consolidation by optimizing state income and controlling spending as well as increasing budget financing capacity.

"The deficit is actually a sacrifice to ensure that the next government will not face problems. So, the decision is taken to ensure correct steps are taken during the transitional period," he said.

In the draft revised 2014 budget, revenues were set at 1,597.7 trillion IDR or down by 69.4 trillion IDR from 1,667.1 trillion IDR. State spending, however, increased marginally by 6.9 trillion IDR, from 1,842.5 trillion IDR to 1,849.4 trillion IDR. Tax revenue in the revised budget was set at 1,232.1 trillion IDR, down by 48.3 trillion IDR from 1.280.4 trillion IDR.

Meanwhile, spending for oil subsidy increased by 74.3 trillion IDR to 285 trillion IDR, from 210.7 trillion IDR. Electricity subsidy target was 107.1 trillion IDR, up 35.7 trillion IDR.

Basic macro-economic assumptions for the revised budget include a 5.5 percent economic growth, a 5.3 percent inflation, a rupiah exchange rate of 11,700 IDR against the US dollar and a 6.0 percent interest rate for three-month state bonds.

The price of Indonesian Crude Oil, meanwhile, was assumed at 105 USD per barrel, while oil lifting was assumed at 818,000 barrels a day and gas at 1,224,000 oil equivalent barrels a day.

Almost all macro-economic assumptions were changed, such as oil lifting, which was set at 818,000 barrels a day from 870,000 barrels a day in the current budget. This was done because in the first quarter of 2014 oil lifting was estimated to have reached only 797,000 a day, due to bad weather, operational disruptions and a natural decline in production in old wells.

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