Red tape holds up Us$50bil needed to end Indonesia’s slump

JAKARTA: Indonesia’s bureaucratic red-tape is preventing almost Us$50bil in fiscal support from being disbursed to virus-hit businesses and health care workers, risking a deeper economic slump amid a surge in cases.

The government has spent less than 5% of the 87.6 trillion rupiah (Us$6bil) set aside for priority health care because of delays in verification and approval processes. Some 85% of 120.6 trillion rupiah in tax-breaks and other benefits for companies has yet to be allotted, official data showed.

The slow spending has frustrated President Joko Widodo, who is borrowing record amounts to finance the stimulus and has threatened to revamp his cabinet if ministers failed to speed up disbursement. The delays are a worry for businesses too, as they brace for a possible recession in South-east Asia’s biggest economy.

“We are running out of time to save the economy,” said Rosan Roeslani, chairman of the Indonesian Chamber of Commerce and Industry. “The government’s stimulus spending is super slow.”

Nowhere is the failure to get the stimulus going more evident than in the country’s health sector. The government announced cash incentives for health workers in the frontline of the Covid-19 fight, but only about 20% of 120,000 eligible nurses have got the benefits. That’s partly because hospitals haven’t recommended workers for the incentives or the local governments aren’t issuing rules, according to Harif Fadhillah, chairman of the Indonesia Nurses Association.

Hospitals too are struggling to get reimbursement for the cost of treating Covid-19 patients because of the multiple layers of approvals and verifications required, said Ichsan Hanafi, secretary general of the Indonesia Private Hospitals Association, representing about 1,300 members.

The delay in spending is already having an impact on growth, according to Roeslani, who forecasts a contraction of 4% to 6% in the second quarter, worse than the official estimate of a 3.8% decline. The economy could enter a technical recession because it may shrink in the third quarter too, he said.

Jokowi, as the president is known, has earmarked 695.2 trillion rupiah in stimulus to help cushion the blow of the pandemic. He’s abandoned a fiscal deficit ceiling of 3% of gross domestic product, with his government pushing the central bank to finance a large part of the spending.

Having secured Bank Indonesia’s help this week in funding the fiscal deficit, the real work now begins in disbursing the money to spur growth, said Ryan Kiryanto, chief economist of PT Bank Negara Indonesia. “Now the work is to ensure that this budget is implemented,” he said.

“We are running out of time to save the economy. The government’s stimulus spending is super slow”. Rosan Roeslani