Govt plans to slash COVID-19 stimulus by 44 percent next year

The government is mulling over a plan to allocate a much smaller budget for COVID-19 stimulus spending next year, as the economy remains on the mend.

The Finance Ministry expects to set aside Rp 414 trillion (US$2.89 million) for the special stimulus budget next year, which would be 44.35 percent lower than the budget for this year.

The ministry plans to allot funds only for the purposes of health care, social protection and economic recovery, down from the five spending categories this year.

“We have identified several agencies and ministerial activities that will strengthen the national economic recovery,” Isa Rachmatarwata, the budgeting director general at the ministry, said at an online press briefing on Thursday. “But we will keep identifying [needs], and there is still a possibility that [the budget] will increase.”

Initially, the government had allocated Rp 699 trillion for this year’s stimulus budget. But the Delta wave, which peaked in July, prompted the government to raise the budget and change spending priorities amid surging demand for hospitalization.

In the January-to-October period, the government disbursed around Rp 495.77, or 66.6 percent of the stimulus. The ministry estimates that between 91 and 95 percent of the stimulus budget will have been spent by the end of the year.

The government has already spent almost the entire allocation for business incentives, notably to relieve companies of income tax, corporate tax and import duties. The second-fastest disbursement was for social protection, with 75.5 percent of the allocation spent, followed by health care.

Overall, state spending grew by 0.8 percent year-on-year (yoy) to Rp 2.05 quadrillion in the January-to-October period. Spending by agencies and ministries was up 14.8 percent yoy in the same period, driven by capital for infrastructure projects and spending for vaccine procurement and COVID-19 patient claims, as well as social assistance.

As business activity improved, a 15.3 percent yoy increase in tax revenue helped push total state revenue up 18.2 percent yoy to Rp 1.51 quadrillion in the January-to-October period.

Only tax revenue from the sectors of financial services, construction and business services still posted contractions.

The budget deficit thus stood at Rp 548.9 trillion, or 3.29 percent of the country’s GDP, a marked improvement over the deficit of 4.67 percent recorded a year earlier.