Jakarta: Regional Indonesian leaders are withholding nearly $20 billion of government funds, including money for social assistance programmes, while they wait for the start of election campaigns in August, palace officials said on Thursday.
The delay in fund disbursements, which represents around 13 percent of the national budget, is contributing to the worst slowdown in Southeast Asia`s largest economy since 2009.
Only 1 percent of the 250 trillion rupiah ($18.75 billion) allotted to regencies and cities from the national government in this year`s budget has been spent, Coordinating Minister for Economics Sofyan Djalil said on Thursday.
A senior palace official, who asked not to be identified because of the sensitivity of the subject, told Reuters: "The local governments are delaying this because they would like to spend the money closer to the local elections."
Sluggish government spending, particularly on infrastructure projects, has prevented a rebound in Indonesia`s economy, which is expected to have stayed below 5 percent in Q2 for the second straight quarter.
"The home affairs minister will form a team to speed up budget disbursement to kick start economic growth. They will visit regions to see what the problem is," Djalil said.
The central bank forecast growth to reach the higher end of its 5-5.4 percent target this year if the government was able to speed up spending.
Indonesia`s more than 500 local government have on average spent only around 25 percent of their regional budgets in the first half of this year, said Reydonnyzar Moenoek, director general of regional finance at the home affairs ministry.
Central Java Governor Ganjar Pranowo, who represents one of Indonesia`s most populous provinces, said some spending had been slow but denied funds were being withheld for political purposes ahead of elections.
"We`re very careful in terms of social help and grants. Everything must be verified because if it turns out to be fictional, we will be arrested," Pranowo said.