Expansion of State Budget

In the next fiscal year, our state budget will expand more than IDR 84 trillion (check at this for the report) or raise 10 percent nominally, but by deducting inflation factor the increase is only around 3-3.5 percent . This increase is expected to be able to promote economic growth until 6.8 percent. Well, it seems that it is making sense.

I posted an abstract of my thesis here that tells that there is negative impact of corruption on development. According to a model developed by Del Monte and Papagni (2001) the channel is state budget. Corruption suffers implementation of state budget, however state budget cannot push growth effectively. That's why there are differences of negative impact between developed and developing countries and among regions (Asia, Africa, South America, Eastern and Western Europe) because the levels of corruption are different among countries. I also conclude that by an increase in combating corruption would push an efficiency of state budget, and at the end it will enhance growth.

Unluckily, Indonesia is still facing bad level of corruption. Combating corruption is moving, but it takes time to see the good result. From 2004 to 2006 the level of corruption decreases from 2 to 2.4 (note that the higher value of level is cleaner, so corruption fall) but this point is still high level of corruption, and the ranking is from 133 of 146 countries to 130 of 163 countries.

In my opinion, state budget is not yet the answer of growth in the short term.

Update:
There is a bad news that the level of corruption in 2007 is higher than that in 2006. The value is 2.3 or drop 0.1 from the last year.