2005 budget 'unrealistic'<\/p>\n
Dadan Wijaksana and Fitri Wulandari, The Jakarta Post\/Jakarta<\/p>\n
President Megawati Soekarnoputri, facing a runoff battle on Sept.
\n20, unveiled on Monday the 2005 state budget draft, which
\npromises higher growth, a lower deficit and a rise in the fuel
\nsubsidy, all of which some economists see as unrealistic.<\/p>\n
The proposed budget projected economic growth of 5.4 percent
\nin 2005 from an expected 4.8 percent this year. It also projected
\nthat deficit would decline to 0.8 percent of gross domestic
\nproduct from an estimated 1.2 percent of GDP this year.<\/p>\n
The targets are based on the assumption that oil prices next
\nyear will average US$24 per barrel, which some say is overly
\noptimistic given that oil prices are currently at record levels
\nof more than $45 per barrel and no one can say when the prices
\nwill peak.<\/p>\n
Standard Chartered economist Fauzi Ichsan, Chatib Basri of the
\nUniversity of Indonesia and Iman Sugema of the Institute for the
\nDevelopment of Economics and Finance were unanimous in their
\nopinion that the targets were unrealistic and driven by political
\nmotives ahead of the runoff.<\/p>\n
\"They (the government) are pushing optimism to the limit. But
\nwe need more concrete evidence of that optimism,\" Fauzi told The
\nJakarta Post on Monday, adding that the budget had a political
\nflavor as the current administration was seeking reelection.<\/p>\n
\"Politically, it is difficult for Megawati to say that the
\nglobal economy is unfavorable for our economy. She has to be as
\nequally optimistic as SBY, who has promised a better economy,\"
\nFauzi said, referring to Susilo Bambang Yudhoyono, who is leading
\nMegawati in all of the opinion polls ahead of the runoff.<\/p>\n
It is feared high oil prices will derail the global economic
\nrecovery, which in turn would hamper the country's exports, a
\ncrucial factor in accelerating economic growth.<\/p>\n
\"This draft has to remain open for the next government to make
\nsome adjustments.<\/p>\n
\"That includes Megawati. If she is reelected, she will have to
\nbe brave enough to make some revisions,\" Chatib said, adding that
\naside from some of the basic assumptions, the tax revenue target
\nand the fuel subsidy could be revised.<\/p>\n
Chatib and Fauzi agreed that it would be extremely difficult
\nto meet the budget targets, and would require a drastic change in
\nthe investment climate, which Fauzi said was very unlikely.<\/p>\n
The government proposed a more than 26 percent increase in
\nsubsidy spending next year to Rp 33.6 trillion, a large part of
\nwhich will go to finance the fuel subsidy.<\/p>\n
Some see this as an effort by Megawati to win wide-ranging
\npolitical support, as the lower classes will enjoy inexpensive
\ncooking fuel, while car owners will benefit from cheaper gas.<\/p>\n
Iman, however, warned that this policy could turn into a \"time
\nbomb\", especially if the average oil prices next year are much
\nhigher than targeted, thus widening the budget deficit.<\/p>\n
If that happens, he said, it would cast a shadow over various
\ndevelopment projects such as bridges and roads, while the
\ndevelopment of some new schools and hospitals would also have to
\nbe halted.<\/p>\n
The International Monetary Fund, as quoted by Bloomberg,
\ndescribed the deficit target as \"ambitious\", but added that it
\nwas consistent with the overall availability of financing, and
\nshould keep the public debt-to-GDP ratio on a declining path.<\/p>\n
\"The prudent budget ... would preserve priority spending on
\nsocial and development needs,\" it said in a statement.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/2005-budget-unrealistic-1447893297",
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