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Address of the President of the Republic of Indonesia on the Presentation of the Government Statement on the Bill on the State Budget for the 2021 Fiscal Year and Its Financial Note Before the Plenary Session of the House of Representatives of the Republic of Indonesia

Bismillahirrahmanirrahim.

Assalamu’alaikum warahmatullahi wabarakatuh,
Good afternoon,
May we be bestowed with peace and prosperity,
Om Swastyastu,
Namo Buddhaya,
Greetings of virtue.

Honorable Vice President of the Republic of Indonesia Prof. KH. Ma’ruf Amin,
Honorable Speaker, Vice Speakers, and Members of the House of Representatives of the Republic of Indonesia,
Honorable Speaker, Vice Speakers, and Members of the Regional Representatives Council of the Republic of Indonesia,
Honorable Heads, Vice Heads, and Members of State Institutions,
Honorable Ministers of the Indonesia Onward Cabinet, Commander of the Indonesian National Defense Forces, Head of the Indonesian National Police, and Attorney General,
Distinguished Ladies and Gentlemen, and My Fellow Countrymen.

The COVID-19 pandemic has become health and humanitarian crises in this century affecting all sectors of human lives. Starting from health issues, the impacts of the COVID-19 pandemic have spread to social, economic and even financial sectors.

Many countries have rolled out extraordinary mitigation measures particularly through fiscal stimulus. Germany has allocated a fiscal stimulus amounting to 24.8 percent of its Gross Domestic Product (GDP); however, its economy has seen a sharp contraction at minus 11.7 percent in the second quarter of 2020. The United States has allocated 13.6 percent of its GDP; however, its economy also declined by minus 9.5 percent. China has allocated a fiscal stimulus at 6.2 percent of its GDP, and its economy has returned to grow by 3.2 percent in the second quarter, but fell by minus 6.8 percent in the previous quarter.

Indonesia has also taken extraordinary measures in response to the COVID-19 pandemic. Law Number 2 of 2020 provides relaxation of the State Budget deficit that can be widened above 3 percent for three years. In 2020, the State Budget has been revised with a deficit of 5.07 percent of GDP and then rise again to 6.34 percent of GDP.

The widening of the deficit is carried out by taking into account the need for state spending to deal with health issues and to rebuild the economy amid the declining state income.

Distinguished Ladies and Gentlemen,
To date, we are still focusing on preparing ourselves to face 2021. Global and domestic uncertainties will continue to prevail.

National economic recovery will be carried on along with the reform in various sectors. The policy of deficit relaxation that exceeds 3 percent of GDP is still necessary by still maintaining fiscal prudence, credibility, and sustainability.

The 2021 State Budget Bill is drawn up to: first, speeding up national economic recovery due to the COVID-19 pandemic; second, encouraging structural reform to increase productivity, innovation, and economic competitiveness; third, speeding up economic transformation towards digital era, and; fourth, capitalizing and anticipating demographic changes.

Considering many uncertainties, the State Budget Bill must be able to anticipate uncertainty in global economic recovery, commodity prices volatility, and development of social and economic orders, and geopolitics, as well as effective national economic recovery, and conditions and stability of financial sector.

Several fundamental reforms must be undertaken, among others: education reform, health reform, social security reform, and budgeting and taxation systems reform.  Focusing on this strategy, the Government upholds the theme of the 2021 fiscal policy “Speeding up Economic Recovery and Strengthening Reform”.

Distinguished Ladies and Gentlemen,
Macroeconomic indicator assumptions that the Government used are as follows: the economic growth is projected to reach 4.5 to 5.5 percent; the rate of the economic growth is expected to be supported by increased domestic consumption and investment as the main driving forces. Inflation will be maintained at a level of 3 percent to support people’s purchasing power. The Indonesian Rupiah is estimated to average in the range of Rp14,600 per US Dollar.

In addition, the estimated 10-year Government Securities (Surat Berharga Negara/SBN) interest rate is at 7.29 percent. The Indonesian Crude Price (ICP) is estimated to average US$45 per barrel. Oil and gas lifting is estimated to reach an equivalent of 705 thousand barrels and 1 million 7 thousand barrels of oil per day, respectively.

Honorable Speaker, Vice Speakers, and Members of the House of Representatives and Regional Representatives Council,
In 2021 State Budget Bill, the budget deficit is projected at approximately 5.5 percent of GDP or Rp971.2 trillion. The figure is comparably lower than the budget deficit in 2020 of approximately 6.34 percent of GDP or Rp1,039.2 trillion.

The Health Budget is planned at Rp169.7 trillion or equivalent to 6.2 percent of the State Budget, and geared towards an increase in and equal distribution of supply, as well as facilitation for the procurement of vaccine; nutrition improvement for pregnant and lactating mothers and toddlers, management of infectious diseases, and accelerating stunting reduction; ensuring more effective and sustainable national health insurance program, and; strengthening disease prevention, detection, and response, as well as the integrated health system.

The education budget in 2021 amounting to Rp549.5 trillion or 20 percent of the State Budget will be focused on improving the human resources quality, capacity to adapt to the ever-changing technology, and productivity through better knowledge in digital economy of the Industry 4.0 era.

The Government will carry out educational reforms through leadership transformation of school principals, transformation of education and teacher training, teaching in accordance with various learning abilities, global assessment standards, and partnership between regional governments and civil society.

In addition, other policies in the education sector also include strengthening vocational programs and pre-employment cards, improving early childhood education (Pendidikan Anak Usia Dini/PAUD); improving the effectiveness of education fund schemes (School Operational Fund/BOS, Smart Indonesia Program/PIP, and the Indonesia Endowment Fund for Education/LPDP); accelerating the improvement of the quality of educational facilities and infrastructure, especially in 3T (frontier, outermost, and underdeveloped) regions, and; better-targeting of the Higher-Education Smart Indonesia Card (KIP Kuliah) and higher education funding.

The development of Information and Communication Technology (ICT) in 2021 with a budget of Rp30.5 trillion (including through Transfer to the Regions and Village Funds/TKDD) will be focused on: accelerating government digital transformation; ensuring effective and efficient public services, particularly in the education, health, and government sectors; consolidating and optimizing shared infrastructure and services; and ensuring public participation in priority development areas and promoting equality with additional internet access in approximately 4,000 villages and sub-districts in 3T regions.

Infrastructure development in 2021 is budgeted at Rp414 trillion, which will be mainly targeted for economic recovery, provision of basic services, and improved connectivity.

The COVID-19 pandemic shows that availability and reliability of fully functioning digital infrastructure are critical and strategic. Infrastructure spending, in this regard, is directed towards strengthening digital infrastructure and encouraging logistics efficiency and connectivity; labor-intensive infrastructure that supports industrial and tourism areas; and construction of public health facilities and provision of basic necessities, such as clean water, sanitation, and housing.

As for Food Security in 2021, a budget of around Rp104.2 trillion is aimed at promoting production of food commodities through development of facilities and infrastructure and utilization of technology; revitalizing the national food system by strengthening farmer and fisherman corporations and food distribution; and developing large-scale food estates to increase food productivity. In addition, the Government is committed to improving the welfare of farmers and fishermen by targeting the Farmer Exchange Rate or NTP (Nilai Tukar Petani) and Fisherman Exchange Rate or NTN (Nilai Tukar Nelayan) of 102 to 104 in 2021.

Social protection support in 2021 is budgeted at Rp419.3 trillion, which is aimed at accelerating social recovery and supporting gradual reforms of the social protection system. Social protection measures are carried out through social assistance programs, such as the aspiring family program, staple food cards (Kartu Sembako), cash assistance, and pre-employment cards; encouraging comprehensive social protection reform programs based on life cycles and anticipation of the aging population; improving integrated data on social welfare (Data Terpadu Kesejahteraan Sosial/DTKS) and mechanisms for distributing social protection programs, as well as strengthening monitoring and evaluation. The gradual reforms of the social protection system is essential in supporting efforts to eradicate extreme poverty by 2024.

Tourism development in 2021 is budgeted at approximately Rp14.4 trillion, which is aimed at encouraging economic recovery in the tourism sector. The policy is carried out through tourism recovery by developing 5 priority tourist destinations: Lake Toba, Borobudur, Mandalika, Labuan Bajo, and Likupang; development of 3A aspects-attractions, accessibility and amenities-as well as improvements to 2Ps-promotion and participation-of private entrepreneurs; a storynomics tourism approach that emphasizes on narrative, creative content, living culture, and cultural strengths; and utilization of the Public Private Partnership (Kerja Sama Pemerintah dengan Badan Usaha/KPBU) scheme in development of amusement centers, such as theme parks that will attract a lot of tourists.

The overall state expenditure policies are expected to support the achievement of development targets in 2021, namely an unemployment rate of 7.7 to 9.1 percent, poverty level in the range of 9.2 to 9.7 percent, with an emphasis on reducing extreme poverty groups, the level of inequality in the range of 0.377 to 0.379, as well as Human Development Index (HDI) ranging from 72.78 to 72.95.

Honorable Speaker, Vice Speakers, and Members of the House,
In line with the importance of the continuation of the National Economic Recovery, the 2021 State Budget Bill will allocate a budget of around Rp356.5 trillion, which is aimed at:
First, healthcare services with a budget of around Rp25.4 trillion for the procurement of antiviral vaccines, health facilities and infrastructure, laboratories, research and development, and Social Security Provider Body (Badan Penyelenggara Jaminan Sosial/BPJS) contribution assistance for Non-Salaried Employees (Pekerja Bukan Penerima Upah/PBPU).
Second, social protection for the middle to lower class society of around Rp110.2 trillion through the aspiring family program, staple food cards, pre-employment cards, and cash social assistance.
Third, sectoral Ministries/Institutions and regional governments with a budget of around Rp136.7 trillion, which is aimed at boosting tourism sector, food security and fisheries, industrial estates, ICT development, Central Government loan to regional governments, and anticipating economic recovery.
Fourth, support for MSMEs of around Rp48.8 trillion, through Smallholder Business Credit (Kredit Usaha Kecil/KUR) interest subsidies, MSMEs financing, guarantees and placement of funds in banks.
Fifth, corporate financing of around Rp14.9 trillion, which is earmarked for credit guarantee companies and SOEs that carry out the assignment.
Sixth, business incentives of around Rp20.4 trillion through taxes borne by the Government, exemption of import income tax, and preliminary VAT refunds.

Honorable Speaker, Vice Speakers, and Members of the House,
In 2021, the budget for TKDD is planned at Rp796.3 trillion. With that budget, the general directives are geared to:
First, support the economic recovery measures in line with the national priorities, through the development of accessibility and connectivity of the economic growth centers, incentive support to the regions to attract investment, improvement of the investment service system, and support for MSMEs.
Second, optimize the use of revenue sharing fund in order to support healthcare services, social safety net, as well as economic recovery as the impact of COVID-19 pandemic.
Third, allocate 25 percent of general transfer fund to accelerate the program of regional economic recovery and human resources development.
Fourth, focus on the use of Regional Incentive Funds or DID (Dana Insentif Daerah) for digital transformation of the education and health sectors, and to empower MSMEs.
Fifth, refocus and simplify types, fields, and activities of Regular Special Allocation Fund for Infrastructure (DAK Fisik Reguler) and Special Allocation Fund for Priority Infrastructure (DAK Fisik Penugasan).
Sixth, the Operational Special Allocation Fund (DAK NonFisik) also supports improvement of human resources in the education sector through independent learning program as well as additional strategic sectors, such as fund for women and children protection services, capital investment facilitation fund, and food security service fund.
Seventh, better-targeting of the allocation of village funds for village economic recovery and development of priority sectors, such as information and communication technology, tourism village development, and achievement of food security.

In the last five years, the results of the use of TKDD budget have been enjoyed by the public through improved performance of basic public services such as household access to drinking water and proper sanitation as well as assisted delivery by health workers. The level of inequality in rural areas also decreases, as indicated by increasingly lower Gini ratio from 0.316 in 2016 to 0.315 in 2019. The same goes for the percentage of poor community in rural areas that fell from 13.96 percent in 2016 to 12.60 percent in 2019.

Honorable Speaker, Vice Speakers, and Members of the House,
Development activities in 2021 will be mainly sourced from independent source of revenue from state revenue, amounting to Rp1,776.4 trillion, primarily from tax revenue of Rp1,481.9 trillion and non-tax state revenue of Rp293.5 trillion.

On the side of taxation, the Government continues to expand tax base and to improve tax administration to increase and explore potential sources of revenue.

In addition, the implementation of tax omnibus law and provision of proper and measurable tax incentives are expected to boost investment and national competitiveness, to accelerate economic recovery post COVID-19 pandemic, and to drive economic transformation.

On the excise side, integrated excise supervision system and excise extensification will be improved to control negative externality.

In 2021, measures to optimize Non-Tax State Revenues (Penerimaan Negara Bukan Pajak/PNBP) are taken, among others, by increasing quantity and improving quality of services, innovation of services, expansion of joint audit objects, effective planning of oil and gas lifting, and efficiency of oil and gas operational cost. Moreover, the improvement of planning and reporting of PNBP continues to be strengthened by adoption of an integrated information technology system.

Honorable Speaker, Vice Speakers and Members of the House,
During transition period of the 2021 State Budget Bill with projection of State Revenues amounting to Rp1,776.4 trillion and State Expenditures amounting to Rp2,747.5 trillion, Budget Deficit is estimated to reach Rp971.2 trillion or equal to 5.5 percent of GDP.

Budget Deficit of 2021 will be financed by making use of secured financing sources that are prudently managed. Debt financing is responsively conducted to support counter-cycle policies and accelerate socio-economic recovery. The Government consistently maintains prudent debt management. Deficit financing of the 2021 State Budget Bill will be carried out through cooperation with monetary authority, while upholding the principles of fiscal discipline and monetary policy discipline as well as maintaining the integrity, credibility, and market trust of the Government securities.

The Government is committed to maintaining fiscal sustainability to keep debt ratio within controlled limit. The Government also continues to increase efficiency of debt cost through market deepening, expansion of investor basis, improvement of market infrastructure of SBN, diversification, and issuance of regional bond or sukuk.

Investment financing will be also carried out by the Government in 2021 with a budget of Rp169.1 trillion. This financing is planned for: first, financing education sector to guarantee the continuity of education program for the next generation as a form of intergenerational responsibility; second, empowering MSMEs and Ultra-Micro (UMi) financing in order to accelerate poverty eradication; third, accelerating the development of facilities and infrastructure in transportation, housing, and energy security; fourth, promoting national export program by increasing competitiveness of domestic goods and services in international markets.

Honorable Speaker, Vice Speakers and Members of the House,
This concludes the Government Statement on the Bill on the State Budget for the 2021 Fiscal Year and Its Financial Note. It is our hope that the deliberation of the 2021 State Budget Bill will be carried out in a constructive manner to make Indonesia an advanced, sovereign, self-sufficient, and distinctive nation based on Pancasila and the 1945 Constitution.

May God the Almighty bestow His Blessings upon us to carry out the tasks and mandate placed by the entire people of Indonesia.

Long Live the Republic of Indonesia!
Long Live the Land of Pancasila!

I thank you,
Wassalamu’alaikum warahmatullahi wabarakatuh,
Om Shanti Shanti Shanti Om,
Namo Buddhaya,
Greetings of virtue.

The post Address of the President of the Republic of Indonesia on the Presentation of the Government Statement on the Bill on the State Budget for the 2021 Fiscal Year and Its Financial Note Before the Plenary Session of the House of Representatives of the Republic of Indonesia appeared first on Sekretariat Kabinet Republik Indonesia.

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