Indonesia plans capital injection for state firms, cuts spending

Posted on 02 June 2016

Source: Reuters

Indonesia plans a capital injection of 53.98 trillion rupiah ($3.94 billion) for 24 state firms this year and cut state spending and revenue in a revision to the 2016 state budget.


Finance Minister Bambang Brodjonegoro announced the revised plan, which needs to be approved by parliament, at a hearing on Thursday. Parliamentary debates on budgets typically take around a month to approve.


The proposed budget revision said the bulk of the capital injection would go to state utility firm PT Perusahaan Listrik Negara (PLN), which could receive 23.56 trillion rupiah for construction of more power plants.


The list for capital injections included state construction firm PT Wijaya Karya.JK and PT Pembangunan Perumahan Tbk, toll road operator PT Jasa Marga Tbk and steel producer PT Krakatau Steel Tbk, among others.


Last year, parliament blocked a government plan for 40.42 trillion rupiah of capital injection into the same 24 state firms in 2016. But it said the government may propose the same plan in a revised budget if it can provide stronger reasons.


Wijaya Karya's corporate secretary Suradi told Reuters on Wednesday the firm plans a rights issue if parliament approves the government's 4 trillion rupiah injection for the company.


At Thursday's meeting, Brodjonegoro also presented a new target for 2016 state revenue of 1,734.5 trillion rupiah ($126.88 billion), down 5 percent from the original budget, but still 15 percent higher than last year's collection.


The new target has taken into account a lower average for global oil prices, smaller oil and gas production and an expected 165 trillion rupiah boost from the tax amnesty programme, Brodjonegoro said.


The revised budget also called for 48 trillion rupiah in state spending cuts, bringing the total 2016 expenditure down to 2,047.8 trillion rupiah.


On balance, Southeast Asia'a largest economy will have to fund a bigger fiscal deficit and will issue an additional 57.8 trillion rupiah ($4.23 billion) of bonds, the minister said.


The fiscal deficit will widen to 2.48 percent of gross domestic product (GDP) from 2.15 percent originally planned.

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