REPUBLIKA.CO.ID, JAKARTA -- The Indonesian government will take extra efforts to reduce the country's current account deficit, which has the potential to reach 4.96 percent of the GDP this year, Chatib Basri said.

"The deficit may reach 4.96 percent of the GDP unless extra efforts are taken," the finance minister said at a working meeting with House Commission XI on the revised 2014 budget here on Monday.

He said the widening deficit could happen as tax revenue could be below the target because of the revision of economic growth and the drop in the prices of mining commodities.

The widening deficit has the potential to run against the rule of law due to the increasing energy subsidy, especially fuel oil subsidy and electricity, as a result of the rupiah depreciation, he said.

"The deficit is widening. Every time the rupiah depreciates by Rp100 the deficit is up by Rp3 to Rp4 trillion. As the assumption of the rupiah rate is up from Rp10,500 to Rp11,700, it means there is a gap of Rp1,200, and if that multiplies by Rp3 to Rp4 trillion the deficit could reach Rp48 trillion," he said.

Unless efforts were taken to curb the budget deficit, Rp110 trillion in tax income would be gone, subsidy spending would rise to Rp348 trillion and debt interest payment would reach Rp14 trillion, Chatib said.

In view of that the government will make every effort to keep the deficit at around 2.5 percent of the GDP in line with the target proposed for the revised 2014 budget.

"In terms of tax, unless something is done, Rp110 trillion will vanish, and internally we have called for extra efforts so that tax income could increase by Rp59.6 trillion, as Rp49.5 trillion of it would have disappeared due to the revision of economic growth," he said.

The efforts plus budget cuts would ensure the deficit does not surpass 3 percent, so that the newly elected government that takes over in October would not have to face fiscal problems, Chatib assured.

"Our main fear is the subsidy burden. The deficit would emerge in the third and fourth quarter although it is now still at 0.1-0.2 percent. If on October 20 (the last day of the present government) the deficit reaches 3 percent it could burden the new government and cause a problem," he said.

Options to reduce the deficit available were limited, but reducing the subsidy burden by raising the fuel price would not be the main option as it was strategic, the finance minister admitted.

"In view of that we will try to cut spending which we do not like. This is unavoidable because the options are limited. We think the government must propose a revised budget to maintain fiscal sustainability," he said.

In the draft revised 2014 budget state revenues are set at Rp1,597.7 trillion, down by Rp69.4 trillion from Rp1,667.1 trillion set in the current budget.

The state expenditures meanwhile would rise by Rp6.9 trillion from Rp1,842.5 in the current budget to Rp1,849.4 trillion in the revised budget.

So, the budget deficit in the draft revised 2014 budget is set at Rp251.7 trillion or 2.5 percent of the Gross Domestic Product. This is higher than the budget deficit in the current budget, which is set at Rp175.4 trillion or 1.69 percent of the GDP.

The lower target of state revenues is set because of the decline by Rp48.3 trillion in tax revenue set in the revised budget, to make the tax revenue reach only Rp1,232.1 trillion from Rp1,280 trillion in the current budget.

The fuel subsidy spending, meanwhile, has increased by Rp74.3 trillion to reach Rp285 trillion from Rp210.7 trillion in the current budget.

The electricity subsidy is set at Rp107.1 trillion, rising by Rp35.7 trillion from Rp71.54 trillion in the current budget.

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