Indonesia to use excess budget cash to rein in 2023 borrowing

© Reuters. FILE PHOTO: Indonesian Finance Minister Sri Mulyani Indrawati answers questions during an interview at the World Bank in Washington, U.S., April 22, 2022. REUTERS/Evelyn Hockstein

JAKARTA (Reuters) - Indonesia will accumulate excess cash in this year's budget and use it to help reduce borrowing in 2023, when it expects to face market volatility and a weakening global economy, its finance minister said on Thursday.

Southeast Asia's largest economy has managed a strong fiscal position this year, as tax revenues got a boost from booming exports - powered by high commodity prices - and a post-pandemic recovery in economic activity.

As of the end of October, the government had collected excess cash of 270.4 trillion rupiah ($17.26 billion), although its overall budget was in a deficit of 169.5 trillion rupiah, or 0.91% of GDP.

Finance ministry officials have said the 2022 fiscal deficit could be near 3% of GDP.

"We will accumulate quite significant excess cash," Sri Mulyani Indrawati told a news conference.

"In 2023, there may be volatility," she warned, adding that maintaining a cash buffer would help the government to minimise its risks.

Next year, the government is targeting a budget deficit of 2.8% of GDP, assuming economic growth of 5.3%, compared with a forecast range of 5% to 5.3% for 2022.

The central bank this week, however, said that 2023 GDP growth may slow to 4.37%.

Market volatility, driven by geopolitical tensions and monetary tightening in many major economies, has hit Indonesia's sovereign bond market in recent months.

Sri Mulyani said the government would reduce its sales target at regular bond auctions in the fourth quarter and optimise raising funds through retail bond sales and loans from multilateral institutions.

Another source of cash would be the planned sale of 128.6 trillion rupiah worth of bonds to the central bank in December, the minister said.

Bank Indonesia Governor Perry Warjiyo said on Wednesday that the central bank would use its bond market operations to ensure that bond yields do not rise excessively next year.

($1 = 15,663.0000 rupiah)