Adrian Wail Akhlas (Jakarta Post Office)
Mon, August 3, 2020
The government is set to provide cash transfers and working capital loans to micro, small and medium-sized enterprises (MSMEs) in its latest attempt to boost economic growth during the COVID-19 pandemic.
Budi Gunadi Sadikin, head of the national task force for economic recovery, said on Wednesday that the government would provide RP 2.4 million ($ 165) for 10-12 million MSMEs, as well as revolving loans of RP 2 million for MSME.
“We hope this aid will keep people’s incomes and be used as working capital to support their businesses,” he told reporters at a press briefing. “We will also add low-interest working capital loans for those who have already started a business.”
These funds can be used by MSME to cover daily needs and resume economic activity, said Budi, who is also deputy minister of state-owned enterprises.
President Joko “Jokowi” Widodo asked the country’s economic recovery task force to focus on boosting economic growth in the third quarter of this year as well as maintaining employment and income levels to prevent a recession this year, Budi said.
The economic crisis has hit MSMEs particularly hard as the government expects the economy to grow by 1 percent at best and contract 0.4 percent at worst. It also forecasts a contraction of around 5 percent in the second quarter of the year due to large-scale social constraints (PSBB) to limit the spread of COVID-19.
The government has allocated 695.2 trillion rupees to bolster the country’s response to viruses and boost economic growth, bringing the fiscal deficit to 6.34 percent of gross domestic product (GDP).
On the same day, the government also guaranteed revolving loans worth 100 trillion rupees to labor-intensive companies to help companies survive the pandemic.
Finance Minister Sri Mulyani Indrawati said Wednesday the loan guarantee program is expected to increase the disbursement of loans from banks to businesses.
To qualify for the government program, labor-intensive companies must hire at least 300 people, prove that their operations have been affected by the pandemic and have a good loan repayment history, argues the minister.
“We hope the loan guarantee program will restore the risk appetite of both banks and businesses to stimulate economic activity,” said Sri Mulyani. “We will use all our policy instruments to improve supply and demand.”
In the face of uncertainty as to how long it will be necessary to fight the COVID-19 pandemic, the government announced that it would raise the assumed state budget deficit for 2021 to 5.2 percent. GDP. The epidemic is expected to continue affecting the economy next year.
The change will be proposed to the House of Representatives, which previously agreed with the government’s proposal for a deficit of between 4.17 percent. and 4.7 percent GDP.