Indonesia Spending Cuts to Depend on Tax Amnesty, Minister Says

  • Rupiah may appreciate slightly from `good' rate: Brodjonegoro
  • G-20 members need structural reforms to spur global growth

Indonesian government spending plans this year will depend on pushing a tax amnesty plan through parliament in coming months, Finance Minister Bambang Brodjonegoro said.

The government is hopeful lawmakers will approve the bill in the next two months, Brodjonegoro said in an interview with Bloomberg Television in Shanghai on Friday. The parliament is delaying discussing the bill, which would allow people to bring back money kept offshore without penalties at low tax rates, the Bisnis Indonesia website reported on Friday.

“Of course we are going to revise the budget, and regarding the spending cut it will be up to the result of the tax amnesty,” Brodjonegoro said. “If there is cut to spending, it will be prioritized on operational spending, and maybe also to some low priority capital spending,” he said.

Indonesia is trying to spur economic growth that slowed last year to the weakest since 2009, by spending more on infrastructure and opening up the economy to greater foreign investment. That has helped spur a rally in the country’s markets, with Jakarta stocks the best performer in Asia and the rupiah the region’s second-best currency so far this year.

The rupiah at its current level of around 13,400 a dollar is a “good rate” and the currency may appreciate slightly, Brodjonegoro said. Foreign investment is expected to grow faster than in 2015 at about 20 percent, though revenues from oil output in the OPEC member will fall short of targets, he said.

The Group of 20 developed and emerging markets need to give direction to provide alternative sources of growth, Brodjonegoro said. As finance ministers and central bankers gathered for G-20 member talks in Shanghai, they appeared split on how best to revive the world economy.

“The prospect of the global growth is always a little bit gloomy,” Brodjonegoro said. “I believe each one of them needs to do another structural reform in order to accelerate their economic growth.”

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