Tug of War Over Jakarta’s Budget
Executive Summary
Jakarta, as the capital of the country, carries significant weight in the economic and political development of the country. At a time when the provincial governments are contributing a substantial amount of the country’s economic growth, developments in Jakarta are a crucial reference point for regional governments. Thus, the tug of war between the provincial executive and the legislative leaders of the Metropolitan City has become a big issue in the media.
The main contentious issue was the provincial budget of Jakarta. The tension during the recent presidential election created a chaotic environment in the internal organization of Jakarta’s Council, which delayed the process of setting up the chairmanship and the management of the legislative body. Because of this delay, the discussion of the City’s budget lagged behind that of other provinces. The preparation of the budget was later marred by the discovery of expenditures amounting to Rp. 12.1 trillion (approximately USD 1 billion) being “smuggled” into the draft budget. These expenditures were inflated and were predicted to entail great potential for corruption. Therefore, the Provincial Government decided to fight the Jakarta Council to prevent implementation of that budget.
On the economic front, the Central Board of Statistics released the trade data for February 2015. The February balance of trade repeated January’s performance, registering another surplus. Exports in February 2015 declined $1,067 million, or 7.99%, from the previous month, to $12,289 million. The decline was primarily due to the lower number of workdays in the month. Adjusting for this, exports remained stable to higher. That situation also held for imports, which fell to $11,551 billion in February 2015 from $12,612 billion in January, a decline of $1,061 million or 8.42%. As a result the trade balance registered a surplus of $738 million, almost the same as the surplus in January, of $744 million. For the first two months of the year, the trade balance surplus was $1,482 million. Meanwhile, the foreign exchange reserves of Bank Indonesia at the end of February 2015 rose to $115.5 billion, a steady increase from the position in the previous month.
February 2015 was marked by deflation of 0.36%. With that performance, year-over-year inflation reached 6.29%, significantly below December 2014, when it was more than 8%.Similarly, data on core inflation also showed deflation, of 0.34%. With that benign inflation data, Bank Indonesia decided to keep the interest rate constant at 7.5%.
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