Belt-tightening measures, subsidy cuts seal new budget<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
President Megawati Soekarnoputri unveiled on Friday the 2004
\nstate budget draft, which would cut the amount of costly
\nsubsidies on fuel and electricity and limit development spending
\nas part of belt-tightening measures to bring government finances
\nback in order.<\/p>\n
Total expenditures are projected at Rp 368.79 trillion
\n(US$44.43 billion), slightly lower than the current budget of Rp
\n370.59 trillion. Revenue is set to increase by 2.3 percent to Rp
\n343.88 trillion.<\/p>\n
Under the draft, next year's budget deficit would shrink to
\n1.2 percent of gross domestic product (GDP) from the 1.8 percent
\nestimated for this year.<\/p>\n
Over the past two years, the government has been forced to
\nimplement belt-tightening measures, at the request of the
\nInternational Monetary Fund, to establish fiscal stability
\nfollowing the late 1990s financial crisis. The budget deficit was
\nabout 3.7 percent of GDP three years ago.<\/p>\n
This is important to show investors the government can
\nprudently manage its finances, particularly as it seeks loans
\nfrom foreign creditors and tries to raise funds on the
\ninternational bond market to help finance the 2004 budget. It
\nwill be doing all this at a time when the IMF will no longer take
\nan active role in designing the country's economic policies.<\/p>\n
\"The ending of the IMF program represents a test and a
\nchallenge for us to show our credibility in implementing economic
\nprograms,\" Megawati told lawmakers when delivering her budget
\nspeech.<\/p>\n
Under the proposed budget, which will be debated by lawmakers
\nnext month, the amount of subsidies will be reduced to Rp 23.31
\ntrillion from Rp 25.46 trillion.<\/p>\n
Subsidies on fuel products will be cut to Rp 12.69 trillion
\nfrom Rp 13.2 trillion, while the electricity subsidy will be
\nreduced to Rp 3.44 trillion from Rp 4.52 trillion. Other
\nsubsidies such as those for fertilizer and credits for farmers
\nwould also be affected.<\/p>\n
Development spending will be limited to Rp 68.10 trillion,
\ncompared to Rp 65.13 trillion under the current budget. Some
\nsectors like agriculture, cooperatives, tourism and regional
\ndevelopment could suffer from the lower spending next year.<\/p>\n
Of the total expenditures next year, Rp 68.5 trillion will go
\nto paying interest on government bonds issued in the wake of the
\nfinancial crisis. Despite the huge amount, this is 16 percent
\nless than the amount allocated for this year.<\/p>\n
The government will have to work hard to raise funds at home
\nand overseas to finance the fiscal gap next year. A large part of
\nthis will come from domestic bond sales of about Rp 28 trillion,
\nand loans from the Consultative Group on Indonesia of about Rp
\n26.5 trillion. The government also plans to raise about $400
\nmillion through an international bond issue.<\/p>\n
Under the draft budget, the government hopes to raise Rp 10
\ntrillion from the privatization of state-owned companies and the
\nsale of remaining assets under the Indonesian Bank Restructuring
\nAgency.<\/p>\n
The government also hopes to increase tax revenue by 6.6
\npercent to Rp 271 trillion. This will largely come from income
\ntax and value added tax.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/belt-tightening-measures-subsidy-cuts-seal-new-budget-1447893297",
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"sponsor": "Okusi Associates",
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