Indonesia’s President Joko Widodo’s draft state budget for next year promises handouts as he seeks a second term in the 2019 presidential election.
The draft includes increases in subsidies, civil servants’ pay and a doubling of benefits to poor households.
But the administration would also keep inflation between 2.5 and 4.5 per cent, enabling the population to meet its basic needs and ensure affordable food prices, Jokowi said.
The spending was a result of equitable growth, the president said. In April he will face retired general Prabowo Subianto, a former general, who is planning a populist campaign.
“In 2019, the government will continue its measured expansionary fiscal policy, in order to encourage a sustainable and equitable economy for all Indonesians,” Jokowi said. “The government will encourage economic growth in the range of 5.3 per cent. This growth will be more just and equitable, by encouraging faster growth in eastern Indonesia, border areas and other areas that are still lagging behind.”
Weak household consumption and the international commodity slump forced the president to ditch his 7-per-cent growth target, set when he took power in late 2014.
In energy-related subsidies next year, the government has set aside 156.5 trillion rupiah (US$11 billion), an increase of 65.6 per cent compared to this year’s budget.
Other subsidies, such as for fertilisers in agriculture, will be 64.3 trillion rupiah, an increase of 4.2 per cent.
Indonesia imports most of its fuel from abroad and the price of car fuels is fixed by the state-owned oil and gas giant Pertamina, amid the falling currency and rising oil prices.
Jokowi has boosted subsidies to keep prices low, rather than risk the political consequences of increasing fuel prices.
He will boost civil service salaries and pensions by around 5 per cent, and doubling benefits to the 10 million poor families under an aid programme to more than 30 trillion rupiah.
Jokowi hailed a fall in the poverty rate in the world’s fourth-most populous nation to a historic low of 9.8 per cent in March, covering 25.95 million Indonesians. The Gini coefficient, which measures inequality, fell to 0.389 in March, the lowest since 2012.
Infrastructural projects are suffering as a consequence, with a budget of 420.5 trillion, a 2.4-per-cent increase from this year. It is the slowest growth in infrastructure budget since Widodo took office in 2014.
The limits on major projects are also an attempt to address inflation by curbing imports of materials produced overseas.
The forecast for the rupiah was set at 14,400 to the dollar, around 1.3-per-cent higher than the current rate.
President Joko Widodo’s re-election chances are far from certain. Picture credit: Flickr