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Indonesia to Widen Budget Gap Amid Growth Slump, Finance Minister Says

Indonesia to Widen Budget Gap Amid Growth Slump, Finance Minister Says

(Bloomberg) --

Indonesia’s budget deficit is set to widen this year as a weakening economy puts pressure on government revenue, Finance Minister Sri Mulyani Indrawati said.

The manufacturing sector is struggling and commodity prices have dropped significantly, Indrawati told reporters Thursday in Jakarta. She said she’d issued a decree that would allow the government to widen the 2019 deficit and borrow more.

“The pressure on revenue is huge mainly because of current economic conditions,” she said. “The deficit is likely to widen,” she added, without providing further detail.

The 2019 budget contained a deficit projection of 1.84% of gross domestic product, although the government later revised that forecast to 1.93%. Indonesia has a legally mandated deficit ceiling of 3% of GDP.

Read: Indonesia Ready With More Stimulus as Global Outlook Darkens

Indrawati said the revenue shortfall has prompted the government to look to sell more bonds on the global market. The government sold about $2.1 billion of euro and dollar denominated sovereign bonds on Wednesday

“At present, interest rates are very low internationally, so this will give us the opportunity to find the best financing,” she said.

The yield on the 10-year government benchmark bond rose 3 basis points to 7.08% from 7.05% following the minister’s comments.

The International Monetary Fund recently cut its growth forecast for Indonesia to 5% from 5.2% on the back of a weaker global economy. The central bank on Thursday cut its benchmark rate for a fourth month in a row to 5%.

To contact the reporters on this story: Karlis Salna in Jakarta at ksalna@bloomberg.net;Arys Aditya in Jakarta at aaditya5@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Michael S. Arnold

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