Deficit warning sounded<\/p>\n
JAKARTA (JP): The current account deficit has reached an
\nalarming level, senior economist Sumitro Djojohadikusumo said
\nyesterday.<\/p>\n
\"We should therefore work harder to bolster exports while
\ncurbing import growth,\" Sumitro said after the Federation of
\nCivil Servant Cooperatives' annual meeting.<\/p>\n
He said the debt service ratio (export revenues against
\nforeign debt service payments) was a danger signal because it had
\nreached 32 percent.<\/p>\n
\"This means we should set aside one third of our total export
\nrevenue to repay and service debt. This condition is alarming
\nindeed.\"<\/p>\n
Sumitro suggested the debt service ratio be reduced to 25
\npercent in two years by increasing exports and curbing import
\ngrowth.<\/p>\n
Minister of Finance Mar'ie Muhammad told the House Budgetary
\nCommission last week the current account deficit was $4.5 billion
\nfor the first semester (April-September) of the 1996\/1997 fiscal
\nyear.<\/p>\n
Most analysts have predicted the current account deficit would
\nincrease to up to 4 percent of gross domestic product this year
\nfrom 3 percent last year.<\/p>\n
Coordinating Minister for Economic and Financial Affairs Saleh
\nAfiff forecast earlier the current account deficit would increase
\nto $8.7 billion for 1996\/1997, up from the $6.8 billion envisaged
\nin the state budget.<\/p>\n
But judging from the 1996\/1997 first semester deficit,
\ndisclosed by Mar'ie last week, this fiscal year's deficit could
\nbe more than $9 billion.<\/p>\n
Analysts have expressed great concern over the deficit's sharp
\nincrease because it happened in the first semester when oil and
\nnatural gas exports greatly exceeded the budget's expectations.<\/p>\n
The state budget, which will end in March, estimates an
\naverage oil price of $16.50 a barrel for the current fiscal year.
\nActual prices in the first semester averaged $19.15 a barrel.<\/p>\n
Despite the alarming current account deficit, Sumitro was
\noptimistic on next year's economic outlook.<\/p>\n
\"Next year will still see economic growth between 7.5 percent
\nand 8 percent,\" Sumitro said.<\/p>\n
He said the declining inflation rate was encouraging.<\/p>\n
\"The inflation rate could be checked below 7 percent this year
\n(compared to 8.65 percent last year),\" he said.<\/p>\n
He said the inflation rate could drop to between 5 percent and
\n6 percent next year, provided the government was consistent with
\nits deregulatory reforms.<\/p>\n
\"Inflationary pressures are not generated by high bank
\ninterest rates but by illegal levies. Hence, don't blame the
\nbanks for the high inflation,\" Sumitro said.<\/p>\n
He was convinced credit interest rates could decline by one to
\ntwo percentage points next year if the inflation rate continued
\nto drop.<\/p>\n
Asked about partnerships between big and small enterprises,
\nSumitro said he doubted the program could work voluntarily.<\/p>\n
\"You cannot see it as a free gift of candies,\" he said.(vin)<\/p>\n
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