House prepared to amend budget<\/p>\n
JAKARTA (JP): House of Representatives Speaker Akbar Tandjung
\nsaid on Wednesday that the legislature was ready to meet with the
\ngovernment to quickly complete the planned revision of the 2001
\nstate budget that has become a prerequisite for the disbursement
\nof the crucial International Monetary Fund (IMF) loan.<\/p>\n
Akbar said that various assumptions set under the current
\nbudget were no longer realistic amid the weakening rupiah and
\nsoaring interest rate.<\/p>\n
\"... The House is ready to revise quickly the 2001 state
\nbudget ... together with the government,\" he said in a speech at
\nthe opening of the House's second session period after a one
\nmonth recess.<\/p>\n
\"The demand of the IMF to revise the current budget is in line
\nwith the thinking of the House ...,\" he added.<\/p>\n
The current state budget is facing the risk of a much greater
\ndeficit which may lead to a severe fiscal catastrophe unless
\nadditional measures are quickly taken.<\/p>\n
The deficit problem has become the main focus of talks between
\nthe government and the IMF special mission during the past two
\nweeks.<\/p>\n
Visiting IMF deputy director for Asia Pacific Anoop Singh told
\nkey legislators during a meeting last week that the IMF would
\nsign a new agreement on economic reform measures with the
\ngovernment only after the budget revision plan had been approved
\nby the legislature.<\/p>\n
The signing of the new agreement would pave the way for the
\ndisbursement of the third US$400 million loan tranche of the IMF
\n$5 billion bailout fund for Indonesia which was delayed last year
\ndue to signs that the government was wavering in its
\nimplementation of the agreed reform agenda.<\/p>\n
\"The loan may not be large in terms of the amount, but its
\nsignificance and implications are enormous, particularly in
\nreviving international confidence in the country's economic
\nrecovery,\" Akbar said.<\/p>\n
Akbar's statement may help quell worries that the House, which
\nis currently embroiled in a political battle with President
\nAbdurrahman Wahid, may try to block the government's plans to
\nrevise the state budget and resolve the growing deficit problem.<\/p>\n
Earlier this week, Coordinating Minister for the Economy Rizal
\nRamli told the Consultative Group on Indonesia (CGI), which
\ngroups together the country's usual donors, that the government
\nexpected to be able to complete the budget revision with the
\nHouse sometime in the middle of May.<\/p>\n
Akbar said that cutting down spending and raising tax revenue
\nwould be inevitable to help resolve the deficit problem,
\nparticularly as the House wanted the government to focus on
\ndomestic financing to plug the budget gap.<\/p>\n
\"For this reason, the House is also urging the government to
\ntry to accelerate the sale of assets (under the control of the
\nIndonesian Bank Restructuring Agency or IBRA) and the
\nprivatization of state-owned enterprises,\" he said.<\/p>\n
Legislators have been perceived as a potential obstacle to the
\nsmooth sale of IBRA assets and privatization program as evidenced
\nin the past, amid rising nationalistic sentiment and worries of a
\n\"fire sale\".<\/p>\n
The government initially set the current budget deficit at 3.7
\npercent of gross domestic product (GDP), but unless measures are
\nimmediately taken, the deficit could expand to the dangerous
\nlevel of 6 percent of GDP as expenditure increases, particularly
\ndue to the weakening of the rupiah and rising domestic interest
\nrates.<\/p>\n
The government and the IMF, however, have reached a broad
\nagreement to maintain the deficit at 3.7 percent of GDP by taking
\nwhat Finance Minister Prijadi Praptosuhardjo has called a package
\nof fiscal adjustment measures.<\/p>\n
The government has yet to fully disclose the details of the
\npackage, which consists essentially of five measures focussing on
\nincreasing domestic revenue and cutting down spending.<\/p>\n
According to a government document leaked to the media earlier
\nthis week, the budget revision includes a new exchange rate
\nassumption of Rp 9,600 per U.S. dollar, an inflation rate of 9.3
\npercent, economic growth of 3.5 percent, and the benchmark
\ninterest rate of Bank Indonesia SBI promissory notes assumed at
\n15 percent.<\/p>\n
Under existing budget assumptions, the exchange rate is set at
\nRp 7,800 per dollar, inflation at 7.2 percent, economic growth at
\n5 percent and SBI rate at 11.5 percent.<\/p>\n
The rupiah is now hovering around the Rp 12,000 per dollar
\nlevel, year-on-year inflation has reached around 10 percent
\nduring the past couple of months, and the SBI rate is already at
\n16.09 percent.<\/p>\n
According to the document, which reportedly has been prepared
\nsolely by Rizal's office, the government has to come up with
\nadditional funding of around Rp 39 trillion in order to check the
\ndeficit at 3.7 percent of GDP.<\/p>\n
The document says that around Rp 3 trillion would be generated
\nby raising tax and excise revenue, including income tax and
\nvalue-added tax; and another Rp 2.5 trillion from non-tax
\nrevenues.<\/p>\n
The government also plans to further reduce fuel and
\nelectricity subsidies by around Rp 5.6 trillion, and save another
\nRp 8.9 trillion by streamlining and refocusing development
\nspending.<\/p>\n
Boosting the efficiency and effectiveness of fiscal
\ndecentralization funds would also save a further Rp 7.9 trillion.<\/p>\n
The government also plans to issue bonds and sell shares in
\nstate enterprises to resource-rich provinces, generating around
\nRp 5.2 trillion.<\/p>\n
The document says that this would allow the government to
\nraise the proceeds target from the privatization program by
\naround Rp 2.2 trillion.<\/p>\n
It adds that the remainder is expected to come from foreign
\nloans. (rei\/dja)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/house-prepared-to-amend-budget-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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