Government struggles to cut deficit<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Soaring oil prices raising government spending on the fuel
\nsubsidy, and coupled with the shortfall in a number of revenue
\ntargets, has left the government under intense pressure to avoid
\na wider-than-expected 2004 budget deficit.<\/p>\n
As against a full-year target of Rp 26.3 trillion (some US$2.9
\nbillion), or 1.3 percent of gross domestic product (GDP), the
\nbudget deficit has already reached Rp 27.4 trillion as of Oct.
\n31, according to Minister of Finance Yusuf Anwar.<\/p>\n
\"That's about 1.4 percent of GDP,\" Yusuf said at a gathering
\nto break the fast over the weekend.<\/p>\n
While the global oil price has forced the government to spend
\nmore on the fuel subsidy, and the transfer of funds to regions
\nunder the revenue-sharing mechanism, slow progress in various
\nrevenue generating sources has made things even worse.<\/p>\n
Under the revenue-sharing scheme, the central government has
\nto split revenue derived from natural resources -- notably oil
\nand gas -- with producing provinces and regencies. The revenue
\nallocation for these funds will go up in accordance with the
\nupward movement of the price of oil in the international market.<\/p>\n
On the budget revenue front, the tax revenue target for
\nexample, which makes up the lion's share of the state budget's
\nfunding sources, has yet to fully pick up with only two months to
\ngo before the budget year ends.<\/p>\n
As of Oct. 31, the tax office had collected some 75 percent of
\nthe full-year target, the ministry's Director General for
\nTaxation Hadi Purnomo said, with the remainder standing at some
\nRp 61 trillion.<\/p>\n
The tax office raked in Rp 178 trillion in the January to
\nOctober period, from a total target of Rp 238.5 trillion, said
\nHadi.<\/p>\n
A higher-than-expected budget deficit would make it difficult
\nfor the government to fulfill its pledge to gradually reduce the
\ndeficit and achieve zero-deficit by as early as 2006.<\/p>\n
Such a prospect could undermine the financial market's
\nconfidence in the economy. The 2004 deficit target was the lowest
\nin the past three years, following a deficit of 2.5 percent of
\nGDP in 2002 and 1.8 percent in 2003.<\/p>\n
But more crucially, the higher deficit should spell extra
\nproblems for the cash-strapped government, as it requires more
\nfunds to cover it -- something the government is finding more and
\nmore hard to do these days.<\/p>\n
The government is already struggling to finance the initial
\n1.3 percent deficit target, which traditionally comes from both
\ninternal and external sources.<\/p>\n
With proceeds from the privatization of state companies
\nfalling short of the target, the government has no choice but to
\njack up revenue from its divestment program, with plans to sell
\nits remaining stakes in a number of recapitalized banks -- BCA,
\nNiaga, Permata, BII -- already high on the agenda.<\/p>\n
If the government fails to provide the financing from domestic
\nsources, turning to foreign loans would be most likely. Based on
\nthe 2004 budget, the government expects some Rp 21.7 trillion in
\nforeign loans for deficit financing.<\/p>\n
Despite the concerns, Yusuf remained optimistic the deficit
\ntarget was still achievable. \"We still have time. And I am still
\nconvinced that we can achieve it.\"<\/p>\n
Mulia Nasution, the ministry's Director General for State
\nTreasury, also shared the same optimism.<\/p>\n
\"Traditionally, in the last two months of the year, tax
\nrevenue increases sharply, mostly from big companies that want to
\nclose their yearly balance sheet,\" said Mulia.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/government-struggles-to-cut-deficit-1447893297",
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