House, government clear hurdles on budget<\/p>\n
JAKARTA (JP): The House of Representatives and the government
\nhave reached an agreement on the major items in the proposed
\nrevision of the 2001 state budget.<\/p>\n
As of late on Friday, the final session between the House
\nbudgetary task force and Minister of Finance Rizal Ramli were
\ncontinuing, although the House was expected to approve the
\nrevised budget at the conclusion of the session.<\/p>\n
\"I expect we can conclude these talks even if we have to stay
\nuntil dawn,\" Rizal said during the meeting.<\/p>\n
The House's approval of the revised state budget is one of the
\nconditions set by the International Monetary Fund (IMF) for the
\ndisbursement of its next loan tranche to the country. The money
\nfrom the IMF is considered as vital in helping revive confidence
\nin the ailing economy.<\/p>\n
One of the crucial decisions reached during the final talks
\nwas to raise the government's dividend revenue from the country's
\nsome 159 state-owned enterprises to about Rp 9 trillion (US$793
\nmillion), compared to the government's proposal of Rp 8 trillion.<\/p>\n
The dividend revenue will include Rp 7.5 trillion from state
\nenterprises under the supervision of the finance ministry, Rp 500
\nbillion from state-owned oil and gas company Pertamina and Rp 1
\ntrillion from Bank Indonesia. The government does not tax the
\ncentral bank, but in return the bank has to contribute part of
\nits \"surplus\", particularly from its foreign currency management.<\/p>\n
Late on Thursday, the House rejected the government's proposal
\nto raise the value added tax (VAT) to 12.5 percent from the
\ncurrent 10 percent.<\/p>\n
Legislators reasoned that the VAT increase would create too
\ngreat a burden on the people and the business sector, who are
\nalready coping with the government's plan to raise fuel prices by
\nan average of 30 percent and electricity rates by 20 percent.<\/p>\n
The government proposed the revisions to the January-December
\nstate budget following the sharp plunge in the value of the
\nrupiah against the U.S. dollar and the increase in domestic
\ninterest rates.<\/p>\n
The proposed revisions include various measures to help limit
\nthe budget deficit at about 3.8 percent of gross domestic product
\n(GDP). Without proper measures, the deficit threatens to widen to
\nthe dangerous level of 6 percent of GDP as a result of the plunge
\nin the rupiah and soaring interest rates.<\/p>\n
Some of the more important measures proposed by the government
\nto curb the budget deficit include increasing fuel prices,
\nelectricity rates and the VAT, and issuing some Rp 2.9 trillion
\nin deficit bonds to wealthier provinces and regencies to help
\nfinance the central government's deficit.<\/p>\n
The House has already rejected the VAT increase and as of late
\non Friday, the legislators had yet to approve the issuance of the
\nbonds.<\/p>\n
The House task force determined that the 2001 deficit should
\nbe set at 3.7 percent of GDP, similar to the figure set in the
\noriginal state budget approved by the House in January.<\/p>\n
In the revised budget, the exchange rate of the rupiah against
\nthe U.S. dollar will be assumed at Rp 9,600 per dollar (compared
\nto Rp 7,800 per dollar in the original budget), the inflation
\nrate at 9.3 percent (compared to 7.2 percent), economic growth at
\n3.5 percent (5 percent) and the interest rate of Bank Indonesia's
\nthree-month SBI promissory notes at 15 percent (11.5 percent).<\/p>\n
The House has already approved these new macroeconomic
\nassumptions.<\/p>\n
Most of the remaining issues left to be resolved center on the
\ngovernment's routine and development expenditures, including the
\nallocation of money for servicing domestic and overseas debts.<\/p>\n
The government has issued about Rp 430 trillion worth of bonds
\nto help recapitalize the country's banking sector, with the state
\nbudget covering the interest rate of these bonds. The government
\ninitially allocated about Rp 58 trillion to pay the coupons of
\nthe bonds, but the rise in domestic interest rates forced the
\ngovernment to increase the allocation to about Rp 61 trillion.<\/p>\n
The sharp plunge of the rupiah has also inflated the
\nallocation for servicing foreign debts.<\/p>\n
The government and the House budgetary task force began their
\nnine-day deliberation of the revised budget earlier this month,
\nat which time Prijadi Praptosuhardjo was finance minister. He was
\nreplaced by Rizal earlier this week in a reshuffle of economics
\nministers. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/house-government-clear-hurdles-on-budget-1447893297",
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