Financing Structure in the Pandemic Period

"Can I have half day leave on Saturday, do not disturb. I just want to sit down, clear my mind and stay still ". The excerpts of Sri Mulyani's complaint as Minister of Finance showed that the difficulty in managing state finances during the pandemic was beyond expectations that people often imagine. Various efforts and policies have been issued but in the end it still did not meet expectations. What Sri Mulyani is complaining about in the textbook we study in terms of the financing structure.

The structure of a government’s financing can be simply divided into two which are internal financing and external financing. Internal financing comes from Taxes, Oil and Gas, and BUMN profits, while external financing comes from foreign loans from the World Bank, Asian Development Bank (ADB) and Islamic Development Bank (IsDB). The financing structure becomes complicated during the pandemic because it causes stagnation in business sector, more than that one way of handling it during the pandemic is to apply a lockdown.

The business is not ready to face Pandemic and lockdown at the same time without any preparation. They find it difficult to contribute to the state in the form of taxes or other state revenues, even the state must provide incentives in the form of reducing tax rates and tax exemptions until September. The absence of taxes causes the state to restructure APBN and APBD in terms of revenue. The government needs to think about another funding options and extraordinary policies to meet the budgetary needs to overcome Covid-19.

The government has regulated the Perppu to accommodate needs during the pandemic. Sri Mulyani explained, there were several funding source options that had been prepared by the government to meet budgetary needs in overcoming Covid-19 through the 2020 APBN up to Rp 405.1 trillion. The source of funding comes from internal funding, namely the remaining excess budget (SAL), funds deposited in public service agencies (BLU), and funds previously allocated for State Capital Participation (PMN). BUMN that act as profit centers and are in good health are required to pay dividends. Another option that will be executed soon is the issuance of Pandemic Bonds. The government bonds have a special clause, which can be purchased directly by Bank Indonesia (BI) on the primary market. Thus, financing or government debt is given directly by BI.

The government maximizes internal funding sources with the premise that risks are far lower than when relying on external funding sources. However, the next question is the extent to which internal funding can be relied upon. The answer to this question is certainly difficult to answer because the problem faced is a virus without a vaccine that causes uncertainty. The government needs to think about contingency if a vaccine for the virus has not been found until September. September became a reference because the incentives provided by the business community ended in that month. This situation can be interpreted in two ways: the government believes that after September the situation will return to normal or internal funding will not be able to provide incentives from the budgeted amount. If the conditions that occur are conditions afterwards, the government needs to find other sources of funding. In addition to internal funding, external funding can certainly be a way out by weighing risks and future interest costs.

Based on the updated data, there are three loans from foreign banks that have provided loans to the government, which are from the World Bank to finance the 2020 APBN, and from the Asian Development Bank (ADB) and Islamic Development Bank (IsDB) to accommodate the impact pandemic situation. The value of loans from each of these financial institutions, amounting to US $ 300 million from the World Bank, valued at US $ 1.5 billion from ADB, and valued at US $ 200 million-US $ 250 million from IsDB. However, the loan value from IsDB is still tentative because it is still in the negotiation stage.

Loans become one of the last avenues which is certainly avoided as much as possible and prioritizes budget relocation. The government has widened the 2020 state budget deficit to 6.27% from the previous 5.07% stipulated in Presidential Regulation Number 54 of 2020. If measured in rupiah this year the state budget deficit widens to Rp 1,028.5 trillion from the previous deficit projection of IDR 852.9 trillion

However, the existing resources have limitations and health is a priority for the government so that people can continue their normal activities after the pandemic. The coming situation will invite many questions without definitive answers. We all hope that the vaccine will be found soon, followed by the end of the pandemic so that each business sector can run normally as the pre-Covid19 situation and not "new normal".