The 2024 Indonesian State Budget Deficit Could Increase if the Rupiah Continues to Weaken

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Erlina Fury Santika 19/06/2024 16:16 WIB

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Several economic experts believe that the ongoing weakening of the rupiah could increase the 2024 state budget deficit and also lead to higher inflation.

Indonesian Rupiah Exchange Rate Against the US Dollar (June 19, 2023 - June 19, 2024)

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The 2024 Indonesian State Budget Deficit Could Increase if the Rupiah Continues to Weaken

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Indonesian Rupiah Exchange Rate Against the US Dollar (June 19, 2023 - June 19, 2024)

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Based on Bank Indonesia's (BI) Jakarta Interbank Spot Dollar Rate (JISDOR) data, the Indonesian Rupiah (IDR) exchange rate against the United States dollar (USD) was recorded at Rp16,368 on Wednesday (June 19, 2024).

This value strengthened slightly by 0.03% from the previous reference on Friday (June 14, 2024), which was Rp16,374 per USD.

Historically, the Rupiah has been at the 16,000 level since April 2024, as shown in the graph. This weakening is predicted to continue due to the sentiment surrounding the US central bank's interest rates and global geopolitical conditions.

(Read also: Rupiah 16,251 per US Dollar on May 31, 2024, Weakening Predicted to Continue)

Citing *Katadata*, Josua Pardede, Chief Economist at Bank Permata, assesses that the weakening Rupiah will impact increased government spending, such as payments for debt interest, subsidies, and energy compensation, as well as oil and gas revenue-sharing funds (DBH) due to changes in non-tax state revenue (PNBP) from oil and gas.

"However, the deviation of the Rupiah exchange rate assumption indicator will also affect the revenue side, so the net impact on the state budget (APBN) tends to be minimal," Josua told *Katadata* on Wednesday (June 19, 2024).

This is based on the macroeconomic indicator assumptions in the 2024 APBN. He gave an example: a Rp100 weakening of the Rupiah per USD could increase government spending by Rp10.2 trillion, including additional payments for debt interest and subsidies.

At the same time, this also boosts state revenue by Rp4 trillion, resulting in an additional APBN deficit of Rp6.2 trillion. With the average Rupiah exchange rate from the beginning of the year to June 14, 2024, ranging around Rp15,859 per USD, there is an increase in government spending of Rp53.3 trillion.

"In addition, there is an increase in state revenue of Rp34.4 trillion, meaning that the 2024 APBN deficit has the potential to widen by approximately Rp18.9 trillion," said Josua.

(Read also: Difference in Budget Deficit Values During the SBY and Jokowi Eras, Who Had the Largest?)

Fikri C Permana, Senior Economist at KB Valbury Sekuritas, also sees the risk of a widening deficit due to increased debt payment costs and energy subsidy costs.

With the weakening Rupiah, the cost of energy imports such as oil and gas will increase. The government may raise the price of subsidized fuel, LPG, and electricity, which could trigger inflation and a decrease in public purchasing power.

"The highest inflation concerns will likely stem from increased energy subsidy spending. Especially if world oil prices increase," said Fikri.

(Read *Katadata*: Rupiah Weakening Potentially Widens 2024 APBN Deficit)

Editor : Erlina Fury Santika

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."

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The 2024 Indonesian State Budget Deficit Could Increase if the Rupiah Continues to Weaken

The 2024 Indonesian State Budget Deficit Could Increase if the Rupiah Continues to Weaken

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