Govt to apply retrenchment measures to limit deficit<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Minister for Finance Boediono said on Thursday the government
\nwould have to make further spending cutbacks to help keep this
\nyear's state budget deficit at a safe level.<\/p>\n
"We'll have to apply retrenchment measures," he told reporters
\non Thursday.<\/p>\n
Boediono did not elaborate, but said that budget spending on
\nservicing the national debt this year should be lower than
\nprojected because of the stronger rupiah and the declining
\ndomestic interest rate environment.<\/p>\n
He was responding to an earlier report suggesting that this
\nyear's state budget deficit could inflate beyond the targeted
\nlevel of Rp 34.4 trillion (equal to 1.8 percent of gross domestic
\nproduct), due to the higher cost of maintaining fuel subsidies.<\/p>\n
The government has been determined to cut this year's budget
\ndeficit to 1.8 percent of GDP from 2.5 percent of GDP last year.
\nFor next year, the government plans to further limit the deficit
\nat 1 percent of GDP in an effort to create a healthy fiscal
\ncondition, which is a crucial factor in instill stability in the
\neconomy, badly hit by the late 1990s Asian financial crisis.<\/p>\n
The deficit projection was made based on the assumption that
\nthe government would erase subsidies on fuel products except
\nkerosene, which is mainly consumed by lower income families.
\nUnder the initial plan, the budget was to only have allocated
\naround Rp 13 trillion to cover the subsidy on kerosene. But
\nwidespread protests in January over plans to eliminate fuel
\nsubsidies forced the government to cancel the plan. At the same
\ntime, oil prices on the international market increased to an
\naverage price level of $26.5 per barrel, compared to the state
\nbudget assumption of $22 per barrel. This means higher spending
\non fuel subsidies, which according to the latest government
\ncalculations could increase to Rp 25.6 trillion.<\/p>\n
Based on this calculation, after taking into account the
\nwindfall profits obtained from higher oil prices on the
\ninternational market, the government will still suffer an
\nadditional deficit of Rp 5.5 trillion.<\/p>\n
"That's why we'll have to institute these retrenchment
\nmeasures," said Director General of Financial Institutions at the
\nMinistry of Finance Darmin Nasution.<\/p>\n
During the first half of this year, the government budget
\ndeficit was relatively low at around Rp 2.5 trillion, mainly
\nbecause of slower progress in carrying out a number of
\ngovernment-funded projects.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-to-apply-retrenchment-measures-to-limit-deficit-1447893297",
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"sponsor": "Okusi Associates",
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