2023 State Budget: Expense swelling up from regional transfers
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - APBN 2023: Beban membengkak transfer daerah
23 November 2022
By: Tegar Arief
The fiscal authority scrambles due to the budget posture next year. Besides facing the budget consolidation demand, the government must also reach deeper into their pocket to increase the direct transfer allocation to the new provinces.
Moreover, based on the information obtained by Bisnis, the 2023 state budget (APBN) was arranged without considering the establishment of the three new provinces.
The new provinces are South Papua, Central Papua, and Papua Mountains, which have been approved by House of Representatives this month.
Bisnis’ source who is close with the fiscal authority explained that the state budget for fiscal year (FY) 23 were arranged and set before DPR approved the three new provinces.
Hence, the transfer to regions and village fund (TKDD) allocation in the 2023 APBN posture has yet to accommodate the new provinces.
This condition forces the fiscal authority to execute a budget policy next year.
Moreover, 2023 is a consolidation year that obligates the government to cut the fiscal deficit to be under 3% of the gross domestic product (GDP).
“Later, there will be a mechanism to adjust [the budget posture],” Bisnis’ source who is close with the fiscal authority said on Tuesday (22/11).
The budget space to manoeuvre next year is tight.
Moreover, the revenue prospect, especially from tax, is predicted to be less than this year and last year along with the increase in global economic uncertainty and commodity price normalisation in the global market that has been the saving grace.
This is also reflected in the draft expenditure in Law No, 28/2022 on State Budget for Fiscal Year 2023.
In the regulation, the government must prepare a thorough plan for expenditure, accompanied by clear output and outcome so that it will have a significant effect on the economy.
State Expenditure Expert Staff of the Finance Ministry Made Arya Wijaya also affirmed that the direction of the expenditure policy focuses on the achievement of the economic purpose next year.
“Every budget allocation prepared by ministries and institutions must be complemented by clear output and outcome,” he explained to Bisnis on Tuesday (22/11).
Made added that the there was an obligation to prepare a smart plan to maintain the effectiveness of the expenditure as well as facilitate supervision and evaluation mechanisms to observe the target realisation.
However, he does not want to explain in detail the plan to reconstruct the budget along with the establishment of the three new provinces.
Meanwhile, one of the policies created by the Finance Ministry to increase the budget for the new provinces is through the cigarette tax instrument.
The condition stated in Fiscal Balance Director General Decision No. KEP-38/PK/2022 on Proportion and Estimation in Cigarette Tax Revenue for Each Province in Fiscal Year 2023 has accommodated the establishment of the three new provinces.
In detail, cigarette tax revenue in South Papua is estimated to reach Rp42.71 billion, Central Papua Rp111.47 billion, and Papua Mountains Rp120.66 trillion.
Referring to Law No. 1/2022 on Financial Relationship Between the Central Government and the Regional Government, 70% of the cigarette tax revenue collected by the provinces will be shared with regencies and cities.
Meanwhile, the cigarette tax tariff is set to reach 10% of the cigarette and tobacco product excise that has been set by the central government.
