This presentation was made by Kunta Nugraha, Indonesia, at the 14th OECD-Asian Senior Budget Officials Meeting held in Bangkok, Thailand, on 13-14 December 2018

1. 1
Indonesia Recent Budgeting
Developments
2018 Annual OECD-Asian Senior Budget Officials Meeting
Bangkok, 13-14 December 2018
MINISTRY OF FINANCE
REPUBLIC OF INDONESIA
Kunta W.D. Nugraha, Ph.D.
Director of Budget Formulation, MoF

2. 2
2
OUTLINE
Recent Economic Development Highlight
Recent Budget Reform Development

3. 3
3
Recent Economic Development
Highligt

4. 4
Indonesia has strong and stable
sustainable growth above 5%

5. 5
Economy is projected to further accelerate in the midst of robust
domestic demand and improving international trade
4,9
5,02
5,07
5,2
5,3
2015 2016 2017 2018* 2019*
GDP GROWTH (%, YOY)
• Stable consumption supported by benign inflation
• Rising investment driven by infrastructure development
and improving business climate
• Increasing export as external demand recovering and
commodity prices increasing
• Additional contribution from various special occasions
such as Asian Games, regional election, general election
preparation, and IMF-WB annual meeting
• External uncertainties: US monetary normalization, trade wars
and protectionism, and geopolitical tension
OPPORTUNITIES:
CHALLENGES:
• Competitiveness needs to be enhanced particularly to fulfill
growing domestic demand
• Projection
• Consumption growth needs to be boosted more
• Credit growth needs to be accelerated more

6. 6
Quality of Growth has Improved, reflected by
improvement of social welfare indicator
Poverty rate decline to the
lowest lever ever 9,82% of the
total population
Gini Ratio displays a
diminishing trend to 0,389
The unemployment rate
demonstrates a diminishing
trend to 5,13%

7. 7
Recent Budget Reform Development

8. 8
STRENGTHENING
POLICY MIX
FISCAL
MONETARY
REAL
SECTOR
• Maintaining prudent and healthy fiscal/state budget
• Increasing income tax rate for 1147 import commodities
(consumption goods)
• Strengthening tax incentives scheme, including Tax
Holiday
• A pre-emptive, front-loading and
ahead-of-the-curve policy response
• Dual intervention in the foreign
exchange market and government
securities market in a measured way
• Strengthening the monetary
operations in the foreign exchange
and money market
• Expediting the
mandatory use of 20%
biodiesel mix
• Promoting the utilization
of local contents in
infrastructure projects
• Simplifying business
licensing including the
implementing Online
Submission System &
Post-Border impact
management
• Infrastructure
acceleration
• Boosting tourism sector
Policy mix is strengthened to support
sustainable development

9. 9
Maintaining prudent and healthy state budget
to anticipate global uncertainty

10. 10
Tax Reform is continuing:
Tax amnesty as initial step to the next comprehensive Taxation reform
2015
2016
2017
2018
2019
Income Tax Relief on
Asset Revaluation
Tax Amnesty
• Redemption fee
reached 1% PDB
• Reducing MSMEs tax to 0.5%
• Accelerating restitution
• Increasing tax amnesty
compliance
• Compliance Risk Management
(roll-out)
• AEoI implementation
• Targeted incentives
• Compliance Risk
Management (full)
• IT enhancement
Human ResourcesOrganization RegulationIT and Database Business Process
Tax Reform
Increasing Non-taxable
Income
• From Rp24.3 milliom
(2013) to Rp54 miilion
• Confirmation on tax
payer status

11. 11
• The contribution of tax revenues to total revenue is
increasing From 74% in 2014 to 82.5% in 2019
• Fiscal incentives (tax holiday, tax allowance, etc) are
provided to maintain the improvement of the investment
climate and increase competitiveness
Higher than average growth of the recent years
(2018-2017 grows 11.1%)
14,6
14,3
13,7
11,6
10,8 10,7
11,6
12,2
10,0
11,0
12,0
13,0
14,0
15,0
16,0
2012 2013 2014 2015 2016 2017 2018
Outlook
2019
APBN
(persen) Tax Ratio (termasukPend.SDA Migas+Minerba)
Tax ratio is on the trend of increase
1.146,9
1.240,4 1.285,0 1.343,5
1.548,5
1.781,0 1.786,4
-
200,0
400,0
600,0
800,0
1.000,0
1.200,0
1.400,0
1.600,0
1.800,0
2014 2015 2016 2017 2018
Outlook
2019
RAPBN
2019 APBN
(triliun rp)
PPh migas Pajak nonmigas Kepabeanan dan Cukai
Oil and gas
income tax
Non Oil and
gas income tax Customs and excise
2019
proposal
2019
Budget
1,146.9
1,240.4 1,285.0 1,343.5
1,548.5
1,781.0 1,786.4
2019
Budget
14.6
14.3
13.7
11.6
10.8
10.7
11.6
12.2
Tax Ratio (include Natural Resources Income Oil &
Gas + Mineral Oil)
Tax revenue has become the main source of revenue
Underpinned by continuous tax reform
percent

12. 12
Estimated Tax Expenditure :
• 2016 = Rp143,6 T or 1,16% GDP,
• 2017 = Rp154,7 T or 1,14% GDP.
Jenis Pajak 2016 2017
PPN dan PPnBM 114,2 125,3
PPh 20,5 20,2
Bea Masuk dan Cukai 8,8 9,2
Total 143,6 154,7
Taxation is also intended as the incentive
for the economy
To support Export and Investment
In 2018 MoF of Indonesia Reported
Tax Expenditure (incentive) for year 2016-2017
Tax Incentive for General/
Specific Sectors

13. 13
Quality of Spending has been improved
Reallocation to the more productive expenditures: education, health and
infrastructure
Rp492.5T
Rp415.0T
Rp123.1T
Budget 2019
Rp160.T
79.9%
52.2%
165.5%
23.1%
∆ 2018 : 2014
353,4
435,0
154,7
410,7
59,7
107,4
341,8
163,5
2011 2012 2013 2014 2015 2016 2017 2018
Outlook
Education Infrastructure Health Energy Subsidy
Expenditures (RP Trillion)

14. 14
Better Targeted Social safety net programs to
address poverty and inequality issues
249,7 260,3
274,7
291,7
385,2
0
50
100
150
200
250
300
350
400
450
2015 2016 2017 2018 2019
Budget Allocation for Poverty Alleviation Program
(Rp Trilion)
9.75
5.13
0
2
4
6
8
10
12
16.58
9.82
0
5
10
15
20
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
0.376
0.410
0.389
0,34
0,35
0,36
0,37
0,38
0,39
0,4
0,41
0,42
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Unemployment rate (%)
Poverty rate (%)
Gini Ratio
• Scholarship for 20 million students from poor families
• Higher education scholarship for 471.8 thousand students from poor families
• 10 million beneficiary families of conditional cash transfers
• 96.8 million beneficiaries of national health insurance program
• Food subsidy
• Etc.

15. 15
577,2
732,1
684,2
765,1
813,5
855,4
573,7
623,1
710,3
742,0
763,6
826,8
0
100
200
300
400
500
600
700
800
900
2014 2015 2016 2017 2018 Outlook 2019 APBN
Line Ministries Spending & Regional Fiscal Fund
Line Ministries Transfer to Regions & Village Fund
Fiscal decentralization has been streghtened to improve
public service delivery at the regional level
Increasing allocation of regional fiscal
fund
Supporting the regions’ financing needs
for public service delivery and
economic developments
Focus on decreasing service inequality
between-region
Synchronizing planning and budgeting
of regional fiscal fund with line ministry
spending
Maintaining the 5 years sustainability
development program (human resource
development, connectivity, tourism
destination, poverty reduction, village
fund strengthening)
Encourage effective, efficient, and
productive use of region’s budget e.
Rp
Trillion

16. 16
255,7
380,9
403,0
429,1
387,4
359,3
14,6
49,0
5,8 6,5
(9,7) (7,3)
-20
0
20
40
60
80
0,0
100,0
200,0
300,0
400,0
500,0
2014 2015 2016 2017 outlook
2018
APBN 2019
Pembiayaan Utang Growth (RHS)Debt Financing
Debt Financing Policy Direction
Productive
• Utilizing debt for productive activities;
• Keeping debt composition in manageable threshold;
• Improving the solvability.
Efficiency
• Increasing accountability of debt
management
• Improving the debt interest efficiency at
manageable risk level
Prudent in keeping
low debt to GDP ratio
2019 Debt Financing
Strategy
Prioritizing debt in Rupiah
denomination to manage
exchange rate risks
Domestic market deepening
The growth of debt financing tends to decrease from 2015
and even records negative growth in 2018 and 2019
2019 Challenges
The end of QE in Europe
and Japan
Continuation of The Fed
fund rate hike
Current account deficit
Trilion Rupiah percent
Debt financing has decreased in the last 2 years
Reflecting healthier and more sustainable State Budget

17. 17
Challenge Ahead
We still need to pursue
industrialization to boost
potential growth

18. 18
Budget financing healthier and more sustain
Encourage more productive
spending
• Reducing the budget deficit
• Primary balance towards positive
• Debt financing decreases
• Investment financing used to
support infrastructure acceleration
• Improve the quality of human capital
• Infrastructure will be the focus
• Develop and support creative
financing
• Synergy central and local gov’t
• Taxation: strengthening policies and
improving organizations
• Non Tax : Amendment Act No. 19 of 2018
concerning Non Tax Revenue
The Way forward
State revenued Reform is
strengthened
Strengthen the fiscal policy to support economic
growth • Encourage technology based product
• Reduce disparities between regions

19. 19
Thank You
Website
www.kemenkeu.go.id
www.anggaran.kemenkeu.go.id