Megawati unveils 2001 draft budget<\/p>\n
JAKARTA (JP): Vice President Megawati Soekarnoputri unveiled
\non Monday the draft 2001 state budget which will be unlikely to
\nprovide any stimulus to the economy because quite a large portion
\nof the spending will go on servicing government debt and
\nfinancing subsidies.<\/p>\n
The budget envisages state revenues at Rp 243 trillion
\n(US$27.93 billion) and total spending at Rp 295.1 trillion,
\nresulting in an estimated deficit of Rp 52.1 trillion or 3.7
\npercent of gross domestic product (GDP).<\/p>\n
"This deficit will be financed both from domestic and foreign
\nsources," President Abddurrahman Wahid said in a budget address
\nread out by Megawati at a plenary session of the House of
\nRepresentatives chaired by Speaker Akbar Tandjung.<\/p>\n
President Abdurrahman Wahid is away on a state visit to
\nseveral Latin American countries.<\/p>\n
The January-December 2001 budget will be the country's first
\ncalendar-year budget. The current April-December 2000 budget is a
\ntransitional one from the previous fiscal years that ran from
\nApril 1 to March 31.<\/p>\n
The budget assumes economic growth of 4.5 percent, an average
\nrupiah exchange rate of Rp 7,300 to the dollar compared to Rp
\n8,700 now, inflation of 7 percent, an average oil price of $22
\nper barrel compared to $33 now, and Bank Indonesia's benchmark
\ninterest rate at 11 percent as against 13.60 percent today.<\/p>\n
The President said that despite the severe budget constraints,
\nthe government was trying to improve the welfare of government
\nemployees.<\/p>\n
"The step to be taken is improving the salary system, namely
\nto integrate all income supports into the main salary," he added.<\/p>\n
However, the juggling of the salary and allowance components
\ndoes not seem to make any difference to the take-home pay of
\ngovernment personnel.<\/p>\n
In fact, if the personnel expenditure in the current nine-
\nmonth budget is annualized and the whole-year spending is
\ncompared to the Rp 39.89 trillion personnel spending budgeted for
\nnext year, the end result is a decline even in nominal terms, let
\nalone in real terms (adjusted for 7 percent inflation this year).<\/p>\n
Abddurrahman said that Rp 32 trillion of the fiscal deficit
\nwould be covered with the proceeds from the sales of state
\ncompanies and asset recovery by the Indonesian Bank Restructuring
\nAgency (IBRA) and the other Rp 20.1 trillion with new foreign
\nloan disbursements.<\/p>\n
The government is scheduled to meet with the country's
\ntraditional donors grouped in the Consultative Group on Indonesia
\n(CGI) in Tokyo on Oct. 17-18 to seek some $4.8 billion in loans.<\/p>\n
Domestic tax receipts will contribute Rp 163.4 trillion or 67
\npercent of total revenues with the bulk of them expected to come
\nfrom income tax and value added tax.<\/p>\n
The spending plan reflects the huge debt burden, as can be
\nseen in the Rp 55.8 trillion, or 4 percent of GDP, appropriated
\nfor the interest costs of treasury bonds and Rp 21.6 trillion for
\nservicing foreign debts.<\/p>\n
As the bulk of revenue has to be used for recurrent (routine)
\nspending, only Rp 33.36 trillion or 11.3 percent of the total
\nspending will be available for public-sector investment in basic
\ninfrastructure.<\/p>\n
"More than Rp 74 trillion or around a quarter of the total
\nspending will be allocated to provincial and district
\nadministrations to help them implement their new political and
\neconomic powers," the President said.<\/p>\n
The government will begin implementing the regional autonomy
\nand fiscal decentralization policy in January.<\/p>\n
Chief economics minister Rizal Ramli told a media briefing on
\nthe budget on Sunday evening that the regional autonomy policy
\nwas crucial to help prevent the country from disintegrating.<\/p>\n
The government expects the economy to grow by 4.5 percent next
\nyear, compared to an estimated 3.8 percent for this year.<\/p>\n
"For 2001 ... it is to be hoped that private investment will
\nbe able to become the driving force (for economic growth)
\ntogether with exports and consumption," Abddurrahman said.<\/p>\n
"By setting up investment and exports as the main driving
\nforces of the economy, it is expected that the process of
\nIndonesian economic recovery will be faster and remain
\nsustainable," he added.<\/p>\n
The government said an average exchange rate of Rp 7,300 to
\nthe dollar was possibly achievable through various effective
\npolicies in the monetary and real sectors as well as by
\ncontinuously improving co-ordination and synchronization between
\nBank Indonesia as the monetary authority and the government as
\nthe fiscal authority.<\/p>\n
The rupiah is currently hovering at around Rp 8,775 per
\ndollar.<\/p>\n
"With a stable rupiah exchange rate ... the inflation rate
\nwill be controllable at around 7 percent while interest rates (on
\nBank Indonesia one-month SBI promissory notes) will be maintained
\nat around 11 percent," Abddurrahman added.<\/p>\n
Inflation this year is expected to surpass the government
\ntarget of 5-7 percent due to the 9.25 percent rise in fuel prices
\nas from Sunday.<\/p>\n
The budget allocates Rp 36.39 trillion for fuel subsidies and
\nRp 11.87 trillion for other subsidies, including those for rice,
\nagricultural credit programs and electricity.<\/p>\n
The financial notes attached to the budgetary address say that
\nthe fuel subsidy estimate for next year assumes another fuel
\nprice increase of 20 percent next April.<\/p>\n
The price increase is part of the effort to reduce the budget
\nburden and to eventually phase out fuel subsidies by 2004.(rei)<\/p>",
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