2000 budget approved<\/p>\n
The House of Representatives has once again demonstrated that
\nit is no longer the rubber stamp for every government policy as
\nit was for the past 30 years. The House approved the 2000 state
\nbudget plan on Thursday only after more than one month of
\nvigorous debates and only after making many substantial changes
\nin the final version of the budget.<\/p>\n
But a big question remains as to whether the changes in the
\nvarious items of expenditures and revenue are for the good of the
\neconomy or whether the revisions will instead affect the
\ncredibility of the budget plan. The market welcomed the budget
\nproposal as pragmatic when it was unveiled to the House in mid-
\nJanuary.<\/p>\n
The final budget plan maintains most of the original
\nassumptions made in January, such as economic growth of 3.8
\npercent, inflation of 4.8 percent and an average exchange rate of
\nRp 7,000 to the dollar for the April to December 2000 period.<\/p>\n
But the assumption for the average oil export price, one of
\nthe most important elements of the budget, was revised upward
\nfrom US$18 per barrel to $20 per barrel. Given the significant
\nrole of oil and natural gas as a source of state revenue, the
\nchange substantially increases the estimate for total revenue
\nfrom the hydrocarbon sector by Rp 5.7 trillion ($814 million,
\nbased on an exchange rate of Rp 7,000 to the dollar).<\/p>\n
A $20 average international price for crude oil for April to
\nDecember appears realistic since international oil prices have of
\nlate been hovering between $28 and $30 per barrel. Even though
\nthe Organization of Petroleum Exporting Countries will decide to
\nincrease its production quota at its annual meeting later this
\nmonth, succumbing to pressure from major consumers, such as the
\nUnited States, the average price will not likely fall to below
\n$20. Last year, for example, Indonesian oil export prices rose
\nfrom a range of $15.12 to $19.68 between April and August to
\n$21.86 to $24 between September and December.<\/p>\n
Most precarious, however, is the substantial increase made
\nfor the revenue target to be raised by the Indonesian Bank
\nRestructuring Agency (IBRA) from its asset sales and the
\nprivatization of state companies. Tasking IBRA to increase its
\nasset sales by Rp 2.6 trillion to almost Rp 19 trillion for the
\nnine-month period seems unrealistic, given the agency's poor
\nperformance in the past year, the quality of the assets under its
\nmanagement and bad experiences of foreign investors in dealing
\nwith the agency. IBRA has thus far raised only about Rp 10.5
\ntrillion of the Rp 17 trillion target set for the current fiscal
\nyear ending later this month. The process of privatizing state
\ncompanies has also been bumpy and full of controversy.<\/p>\n
Increasing revenue from dividend payments by state companies
\nof Rp 1.28 trillion to Rp 5.28 trillion is also risky in view of
\nthe weak economic recovery.<\/p>\n
Shedding off Rp 4.3 trillion from the Rp 42.36 trillion
\noriginally estimated interest cost on treasury bonds for bank
\nrecapitalization is also worrisome. True, this measure could
\nallow bigger appropriations for other spending but it would also
\nmean a delay in the issuance of bonds for bank restructuring,
\nwhich is so vital for a sustainable economic recovery.<\/p>\n
The 12 percent increase in fuel prices, lower than the 20
\npercent proposed by the government in January, could minimize the
\nrisk of mass social unrest. But this populist measure would
\nincrease fuel subsidies by Rp 4.16 trillion to Rp 22.46 trillion.<\/p>\n
One would therefore see the revised budget with a sense of
\nforeboding. The significant boost in budgeted domestic revenue
\nwhich prompted the government and the House to agree on
\nsubstantial increases in fuel subsidies, personnel spending to
\nmeet pay rises and development (investment spending) depends on
\nseveral revenue assumptions that are highly prone to
\noverestimation.<\/p>\n
It is therefore most imperative that both the House and the
\ngovernment closely and carefully monitor the budget
\nimplementation and should not hesitate to act firmly and speedily
\nto make adjustments to actual developments.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/2000-budget-approved-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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