Indonesia's Policy to Design 2022 State Budget Amid Health and Economics Uncertainty

Indonesian government recognizes the fact that Covid-19 pandemic has not ended and is still a threat to world. With the emergence of a new variant, namely Omicron, anticipation and mitigation need to be prepared as early as possible.

To prevent disruptions on structural reform program and national economic recovery, Indonesia is to design the 2022 State Budget with those facts in mind.

This was conveyed by President Joko Widodo during the Submission of the Budget Implementation List, at the State Palace, Jakarta, Monday, November 29, 2021. 

President Jokowi handed over DIPA and the 2022 TKDD Allocation List Book, at the State Palace, Jakarta, Monday (29/11/2021) afternoon. (Photo: BPMI Setpres/Lukas)

"Facing the uncertainty of 2022, we must design a budget for 2022 that is responsive, anticipatory, and flexible. Always innovating and anticipating various changes that occur while maintaining good governance," said the President.

The Head of the State views that the 2022 State Budget has a central role. As the holder of the G20 presidency, Indonesia must demonstrate its ability to deal with climate change, especially in reducing emissions and moving to improve the environment in a sustainable manner.

"We have to show real action, our commitment to a green and sustainable economy," he added.

In addition, the 2022 State Budget must also encourages the revival of the national economy and support structural reforms. 

The President emphasized that the government will focus on six main policies. They are:

• First, continue controlling Covid-19 while still prioritizing the health sector.  
• Second, maintaining the sustainability of social protection programs for the poor and vulnerable.
• Third, the improvement of superior human resources. 
• Fourth, continue infrastructure development and improve technology adaptability. 
• Fifth, strengthening fiscal decentralization to increase and distribute welfare among regions. 
• Sixth, continuing budgeting reform by implementing zero-based budgeting to make spending more efficient.

"Once again in 2022, we must continue to prepare ourselves to face the risk of the Covid pandemic which is still looming over the world and our country, Indonesia. Uncertainty in the health and economic sectors must be our basis in planning and implementing programs," he said.

Meanwhile, Minister of Finance Sri Mulyani, during the same occasion, explained that the increased consumption and production activities will become a provision to enter 2022.

“Our Consumer Confidence Index has started to recover even before the onset of Covid. Our PMI (Purchasing Managers Index) has also increased with the ability to manage Delta variants. Likewise with the growth of other indicators that are quite strong, such as exports, imports, and electricity consumption," explained the Minister of Finance.

Furthermore, the Minister of Finance explained that the 2022 State Budget is prepared with the assumption of these criteria:

•  5.2% economic growth
• 3% inflation
• An exchange rate of Rp. 14,350 per US dollar
• Interest rates for 10-year state securities at 6.8%
• Oil prices at 63 dollars per barrel
• Oil production volume at703,000 barrels per day
• Gas production volume at 1,000,036 barrels per day

For the targets to be achieved in 2022, namely the unemployment rate, it is expected to decline at the level of 5.5 to 6.3%. 

The poverty rate is expected to fall below 9% again, which is between 8.5 and 9%. 

Gini ratio will improve at 0.376 to 0.378. The human development index will continue to increase from 73.41 to 73.46. 

The farmer's exchange rate will be kept above 100, i.e. 103 to 105, and the fisherman's exchange rate at 104 to 106.

"For next year, state revenue, in accordance with the law, is IDR 1,846.1 trillion. Consisting of IDR 1,510 trillion from taxation, IDR 335 trillion from non-tax state revenue, and IDR 0.6 trillion of grants. Next year's state spending will reach IDR 2,714.2 trillion, of which the central government will spend IDR 1,944.5 trillion and regional government of IDR 769.6 trillion. Next year, we will still experience a deficit of 4.85% of GDP or IDR 868 trillion,” said the Minister of Finance.