In for difficult year<\/p>\n
Minister of Finance Boediono was not exaggerating in charting
\nout a much more difficult time for both the economy and fiscal
\nmanagement in 2004 due to the combination of unfavorable external
\nand internal factors.<\/p>\n
The global economic outlook remains uncertain with big
\ndownside risks despite the successful end of the war in Iraq, and
\nintra-regional economic activities in Asia have been hindered by
\nthe threats of Severe Acute Respiratory Syndrome (SARS).<\/p>\n
Indonesia itself is in for heightened political emotions and
\nturbulence next year when an estimated 130 million voters across
\nthe world's largest archipelago state will hold three rounds of
\ngeneral elections, one for national and regional legislative
\nbodies and the other two for president and vice president.<\/p>\n
Even though money politics will likely fuel bigger spending,
\ngeneral consumer confidence will decline. Likewise business
\nconfidence will weaken as investors put most business plans on
\nhold, waiting for the new government and its policy stance.<\/p>\n
No wonder, most analysts predict economic growth next year at
\na range of 3.3 percent to 3.5 percent, with similar levels
\nexpected for the following year.<\/p>\n
Further clouding the economic outlook is the bigger threat to
\nsound fiscal management and, consequently, to macroeconomic
\nstability.<\/p>\n
Boediono told the Budget Committee of the House of
\nRepresentatives on Wednesday that if the government did not renew
\nthe extended fund facility of the International Monetary Fund
\nafter its expiry later this year, the country would be deprived
\nof the chance of getting new debt rescheduling deals from the
\nParis Club of sovereign creditors.<\/p>\n
Without the debt-rescheduling facility, the government's
\nspending on foreign debt amortization alone will triple to almost
\nRp 47 trillion (US$5.2 billion) next year. Further threatening
\nfiscal sustainability is the bigger sums of government domestic
\ndebts (bonds) maturing in 2004 and in subsequent years. Next
\nyear, domestic debt principal payments alone will double to Rp
\n30.5 trillion from Rp 13.5 trillion this year.<\/p>\n
Hence, total foreign and domestic service burdens (interest
\nand principal payments) next year will take up as much as 41
\npercent of total domestic revenues.<\/p>\n
How will the government cover this?<\/p>\n
Increasing the budget deficit from this year's level of 1.78
\npercent of gross domestic product is politically unfeasible as
\nthe National Five-Year Development Program (2000-2004) mandates a
\nzero deficit next year.<\/p>\n
Such a fiscal stance also would make the market jittery,
\nincrease sovereign risk thereby raising the costs of government
\nborrowing (T-bond coupon), heighten inflationary pressures and
\nincrease downward pressure on the rupiah.<\/p>\n
Increasing tax revenues is extremely difficult amid low
\neconomic growth. Even the tax receipt target this year is already
\na tall order due to the recent sharp cuts in the luxury sales
\ntaxes on many goods. Oil and natural gas tax revenues are not so
\npromising either in view of the downward trend in international
\noil prices. Boediono himself assumes a price range of $17 per
\nbarrel to $20 per barrel next year, down from $22 per barrel to
\n$23.50 per barrel this year.<\/p>\n
The privatization of state companies, which is tasked with
\nraising Rp 8 trillion this year, is even more difficult. Not even
\none of the two dozen state firms selected for divestment has thus
\nfar been sold, due to political opposition from many House
\nmembers.<\/p>\n
The political climate for privatization next year is expected
\nto be much more hostile as many politicians will likely tend to
\nwhip up narrow-minded nationalist sentiment against foreign
\ninvestors.<\/p>\n
Moreover, most foreign investors are now jittery about taking
\nstakes in state companies after the wave of political and legal
\nentanglements faced by privatized companies such as PT Indosat
\nlate last year.<\/p>\n
Asset recovery by the Indonesian Bank Restructuring Agency
\n(IBRA) will no longer produce big proceeds as most of the prize
\nassets under the agency's management have been disposed of. Its
\nsales revenue target of Rp 26 trillion this year could be the
\npeak of IBRA's asset recovery before the end of its mandate next
\nFebruary.<\/p>\n
Bigger loans from the Consultative Group on Indonesia (CGI)
\ncreditor consortium are also virtually impossible, especially if
\nthe government decides not to extend its IMF-supervised reform
\nprogram. The most the government can expect from the CGI next
\nyear is as large as its total pledges of $2.7 billion this year.<\/p>\n
Boediono said he was still optimistic about checking the state
\nbudget deficit at one percent of GDP next year, provided all
\nbranches of the government are united with strong determination
\nto push ahead with economic reforms and to maintain high fiscal
\ndiscipline.<\/p>\n
But this is quite a big appeal as most governments tend to
\npursue populist measures in an election year. Moreover, virtually
\nthe whole government, from the President and vice president down
\nto Cabinet ministers, House members, governors and district
\nchiefs will be preoccupied with campaigning for their respective
\npolitical parties.<\/p>\n
The ominous signals conveyed by Boediono should serve as a
\nstrong warning to the government, including the House, to stick
\nto the reform agenda and to seriously consider extending the IMF-
\nsupervised reform program at least for one year.<\/p>\n
-------------<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/in-for-difficult-year-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }