JAKARTA, May 25 (Reuters) – Indonesia’s parliament will soon start deliberating on a revision to state finance laws, but the focus will not be on changing rules on fiscal deficit limits, a senior lawmaker said on Monday.
Investors are paying close attention to fiscal sustainability in Indonesia due to President Prabowo Subianto’s big spending plans, with particular focus on whether he might change rules that cap the annual budget deficit at 3% of gross domestic product and public debt at 60% of GDP.
Fitch Ratings, among two rating agencies that cut Indonesia’s credit rating outlook this year, has cited potential changes to the fiscal and debt limits in state finance laws as factors in their outlook revisions.
Mukhamad Misbakhun, head of the parliamentary financial commission, said lawmakers would soon begin to draft a bill that will revise several existing financial laws at once – known as an omnibus bill – to align those with the establishment of new sovereign wealth fund Danantara.
Asked about potential changes to fiscal rules, he told reporters: “We are not heading into that situation yet.”
The main point of the revision would be to shift the appointed stakeholder of state investments in these laws from the finance minister to Danantara, Misbakhun said on the sidelines of an economic forum.
That would include giving the dividends of state companies to Danantara and removing those as a source of income for the state budget.
Parliament’s financial commission will start working on the omnibus bill when a revision to the financial system law is completed, Misbakhun said, referring to a bill expected to expand the central bank’s mandate to emphasise its role in promoting economic growth.
Prabowo, who is targeting annual growth of 8% within his term, launched Danantara in February last year, putting the management of all state-owned companies under the fund, with assets totalling more than $900 billion.
A unit under Danantara has also been given a mandate to become the sole exporter of Indonesia’s strategic commodities, starting with coal, palm oil and ferroalloys.
(Reporting by Gayatri Suroyo; Editing by Martin Petty)
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