Dynamics of Deficit Budget

In the Macro Economics and Fiscal Policy Framework 2012 which reported by Ministry of Finance, estimated that the budget deficit is about 1,8 % on GDP or Rp 124,7 bilion at 2011. Budget deficit is a fiscal policy indicator that used by government. Fiscal expansionary is used to stimulate the economy by the budgeting procces.

 

Keynesian’s opinion, that fiscal policy is one of effective policy to increase the national income and encourage the economy activities. On the other hand, Monetarist says that fiscal isn’t effective policy if the policy doesn’t affect the money supply. This opinion is based on the crowding-out effect on investment.

Generally, there are three sources can be used to deficit budget. Foreign debt, central bank, and financial domestic sector. If the government uses the money from central bank (Seignorage, increasing in number of money supply), it can be dangerous and affect the inflation that monetary phenomenon. And if using the funds from domestic sector, it also can affect the hard-liquidity. Moreover, budget realization is still low, about 28%. At least, foreign sector can be used, debt or non-debt. But, many things should be consideration about this decision, especially about national-interest.