Encourage investment and increase infrastructure budget
Encourage investment. To overcome unemployment and poverty, the long-term solution is to encourage private investment. At present, the gross domestic investment level. (GDI) is only 19% of GDP, far below the pre-crisis figure which averaged 30%. While investment has not yet shown signs of wriggling, fiscal policy must be more expansive and if necessary the deficit is pushed up to 3% of GDP or the maximum allowed by law. This additional deficit can then be used to build labor-intensive infrastructure. There are two advantages to this type of strategy. First, creating a better and broader infrastructure that will encourage private investment.
Second, creating jobs temporarily before the private sector stretches again. Increasing the deficit certainly requires financing and means the government must increase its debt stock. From the profile of maturity of foreign and domestic debt, it appears that after 2012 liabilities due are decreasing sharply (Ogbuda on Trade receivables management and liquidity journal).
That is, there is an opportunity to increase the stock of debt as long as the debt does not mature before that year. Therefore, the new debt created due to an increase in deficit must be in the form of long-term debt. Even if they want to look conservative, an increase in infrastructure budget need not lead to an increase in debt stock.
You do this by increasing fiscal effectiveness. During the administration, the government consumption budget had increased from 7.2% of GDP to 8.7% of GDP. On the other hand, the development budget fell from 4.4% to only 2.8% of GDP. From these statistics we can know that fiscal consolidation is not done correctly. This method cannot be said as fiscal consolidation! The approach should be reversed, government investment increased or maintained, and at the same time consumption was reduced. If the approach is reversed, there is actually an opportunity to increase government capital expenditure by 1.5% of GDP or around 30 trillion.
With this much money, the fiscal position remains safe and we can still increase the budget for infrastructure development. The money can also be used as a buffer for possible swelling of the subsidy budget as is happening now. We actually still have room to create fiscal stimulus, reduce unemployment, and provide subsidies.
That is, the most important thing is precisely how we manage state expenditure more effectively. Unfortunately, for the past three years this has not been done. Fiscal consolidation is just empty jargon. The new government must of course make changes in fiscal policy. Unfortunately again, the intention in that direction has not yet been seen.
The Minister of Finance indicated that the 2005 Draft State Budget would not yet be revised and the fiscal policy would not be changed, aka the same as the previous cabinet. If the old paradigm is used, then we are very difficult to expect changes in fiscal policy. And, that means we cannot build, reduce unemployment, and eradicate poverty. We all certainly do not want the same thing to happen repeatedly, from one government to the next.
Quo vadis change?
state expenditure more effectively. Unfortunately, for the past three years this has not been done. Fiscal consolidation is just empty jargon. The new government must of course make changes in fiscal policy. Unfortunately again, the intention in that direction has not yet been seen. The Minister of Finance indicated that the 2005 Draft State Budget would not yet be revised and the fiscal policy would not be changed, aka the same as the previous cabinet. If the old paradigm is used, then we are very difficult to expect changes in fiscal policy. And, that means we cannot build, reduce unemployment, and eradicate poverty.