Indonesia Subsidies Policymddb.apec.org/Documents/2015/FMP/WKSP1/15_fmp_wksp1_018.pdf ·...
Transcript of Indonesia Subsidies Policymddb.apec.org/Documents/2015/FMP/WKSP1/15_fmp_wksp1_018.pdf ·...
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2015/FMP/WKSP1/018 Session: 5
Indonesia Subsidies Policy
Submitted by: Indonesia
Workshop on Fiscal Management Through Transparency and Reforms
Bagac, Philippines9-10 June 2015
Indonesia Subsidies Policy
APEC Workshop on Fiscal Management through Transparency and Reforms
June 9-10, 2015
Dr. ParjionoDirector
Center for Regional and Bilateral Policy
The Ministry of Finance
Outline
Fiscal Policy
Subsidy Reform
Challenges
Fiscal Policy
Macroeconomic Stability
Strengthen Budget
Structure
Real Sector and Investment
Support
Achieve Macroeconomic Stability
Main focus to improve current account profile
Better fiscal profile through larger fiscal space
Sustainable revenue source
Quality of spending –more productive expenditure
Manageable fiscal deficit
Provide better targeted incentives for investment
Provide tax incentives for manufacturing industries, esp. downstream sectors and higher value added industries
Provide incentive for infrastructure investment, including PPP financing and optimization of SOEs as development agents
Establish One Stop Service (OSS) Center at BKPM Office as an integrated services to provide quick, simple, transparent, integrated license services
Recent Fiscal Policy
4
Indonesia government’s medium-term fiscal approach – To focus on:(1) Macroeconomic stability, (2) Strengthen budget structure, (3) Real sector and investment support
Assumptions: 2014 2015 2016
Period Realized Revised Budget Preliminary Budget
Growth (%) 5.1 5.7 5.8 – 6.2
Inflation (%) (YoY) 8.4 5.0 4.0 (+/- 1.0)
3-month-SPN 5.8 6.2 4.0 – 6.0
IDR/USD (average) 11,878 12,500 12,800 – 13,200
Indonesia Crude Price (ICP) (USD / bbl) 97 60 60 - 80
Lifting
Oil Lifting (thousand bbl / day) 794 825 830 - 850
Gas Lifting (thousand bbl / day oil equivalent) 1,224.3 1,221 1,100 – 1,200
Oil & Gas Lifting (thousand bbl / day oil equivalent) 2,017.8 2,046
The Budget – Macroeconomic assumptionsFollowing the latest economic developments….
Source: Ministry of Finance, April 2015
Stable Household Consumption
Subsidy Reform
Govt Budget Savings
Strong Investment through rising infrastructure spending
Growth
Government/ Bank Indonesia Policy
Tariff adjustment / Oil Price / FX Movement
Inflation Foreign Exchange3-month-SPN
Fed Rate Hike Expectations
ECB QE
Current Account Profile
Capital Outflow
Correlation to global rates
Stable Inflation
ICP / Lifting
World oil supply to rise
Uncertainty remains
Old Oil Wells
Lower volatility -food component
Key determinants of revised macroeconomic assumptions
5
2015 Budget in Brief
• Healthy, Productive, and High Quality BudgetGoals
• Momentum for Fiscal Policy Breakthrough2015
• Fuel Subsidy Reform
• Government Institutions Spending Retrenchment PolicyGreater
Fiscal Space
More Money for Productive Programs
Fiscal Vulnaribility
Decrease
Subsidy Reform
2015 Subsidy: Fuel Subsidy Reform to enhance quality of spending
Subsidy for 2015
Subsidy
Rp. 74.3 TNon Energy Subsidy
Rp. 137.8 T Energy Subsidy
Direction:1. Price stability of basic needs2. Maintaining the purchasing power,
esp. the poor3. Availability of staples supplies4. Increasing competitiveness and
financial access of the SME’s
Fuel Subsidy Reform
Fuel Subsidy Adjustment
Fixed Subsidy for Diesel Fuel
Subsidy Removal from Premium
Bold and Sustained Fuel Subsidy Reform …to achieve healthier, fairer, and more sustainable state budget
Social safety net
Infrastructure Development
Maintaining
purchasing power
Deficit control
qualitySpending
Fiscal sustainability
The saving from fuel subsidy reformof subsidy removal for gasoline andfixed subsidy for diesel: Rp 211,3 T.
Rp 276 T
Rp64,7T
2015 Revised Budget
Reallocation
9
6500
5500
8500
750076007250
73006900
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Gasoline Diesel
Subsidized fuel price hike*
Market price policy**
Subsidized fuel price hike *
Fixed subsidy policy**
• As of Nov 18, 2014
• As of Jan 1, 2015 and Recent Price
Energy Subsidy 2004 - 20152015: Energy Subsidy
Energy Subsidy137.8 T
Rp.64.7 TFuel Subsidy
Rp. 73.1 Power Subsidy
Energy Subsidy for 2015
The Expected Benefits
1. Lower inflationary pressure
2. Widening fiscal space
3. Enhance credit rating
First time ever: the infrastructure expenditure is higher than the energy subsidy(2015 revised budget)
Educational Budget % of total spending
Source: MoF Indonesia
Electricity Subsidy Budget Allocation
57.6
90.4 94.6
100.0 103.8 101.8
68.7 73.1
-
20.0
40.0
60.0
80.0
100.0
120.0
APBN-P Real APBN APBN-P
2010 2011 2012 2013 2014 2015
Billion Rp
2015 Non Energy Subsidy
Non Energy Subsidy 2004 - 2015
Non Energy Subsidy for 2015
Challenges
Challenges
• ability for government to continue passing through price changes
• helping consumers cope with price volatility.
• APEC Role?
Thank You