Prudent budget<\/p>\n
The structures of revenue and spending plans for the 1997\/1998
\nfiscal year beginning in April are very similar to the current
\nstate budget, which is based on a conservative fiscal policy. The
\n11.6 percent nominal increase, or 5 percent in real terms
\n(adjusted for the 6.7 percent inflation last year), in the
\nproposed budget will not have a significantly expansive impact on
\nthe economy.<\/p>\n
Foreign political analysts may see the budget as unusually
\ntight and austere in view of this year's general election, which
\nin many other countries would call for an expansive spending
\nprogram to finance political goodies for the electorate.<\/p>\n
An austere, realistic budget, however, is precisely what the
\neconomy needs for sustainable, healthy growth. Conservative
\nfiscal management precludes any drastic, shock-therapy measures
\nin case assumptions of revenue targets err. The budget also
\ndemonstrates the government's determination to maintain prudent
\nmacroeconomic management, one of the foundations of long-term
\nsustainable growth.<\/p>\n
The draft budget maintains the target of monetary aggregates
\nat the same level as the current fiscal year -- an 18 percent
\nexpansion in economic liquidity and a 17 percent increase in
\ntotal bank lending. The estimated average price of oil, which
\ntogether with natural gas accounts for around 14 percent of total
\ninternal revenues, is also maintained at US$16.50, the same price
\nused for the current budget revenue projection.<\/p>\n
The prudent, realistic budget will keep investors assured of
\nstability and consistency in macroeconomic policies; these
\npreconditions will in turn maintain a high rate of capital flow,
\nbadly needed to cover the large deficit in the balance of
\npayments current account. In fact, the government's estimate of
\n$9.8 billion in the current account deficit, or 4 percent of
\nGross Domestic Product in the coming fiscal year, rests on the
\nassumption that official and private capital flow will increase
\nto $16.18 billion.<\/p>\n
The biggest increase in revenue is expected from non-oil tax
\nreceipts, notably income tax, envisaged to rise 22.8 percent.<\/p>\n
This is the precise reason the budget will not have a
\nsubstantially expansive impact on domestic market demands. Around
\nRp 64.7 trillion ($27.4 billion), or 64 percent of total
\nspending, will be derived from taxpayers through taxes and excise
\nduty. Moreover, another Rp 19.23 trillion, or 19 percent of total
\nspending, will be allocated to foreign debt servicing and
\nrepayments.<\/p>\n
Another outstandingly sound trend in the budget plan is the
\n17.30 percent increase envisaged in government savings (the
\nbalance between internal revenues and routine spendings).
\nIncreased savings will not only reduce dependence on foreign
\nloans for public sector investments, but will also give a
\nbroader leeway for the government to better target equity
\ndevelopment spendings.<\/p>\n
The largest increase in routine spendings -- at almost 16
\npercent -- will go to personnel expenditures, due to an estimated
\n10 percent rise in civil service and military salaries and
\npensions. The government planned an annual increase in the civil
\nservice pays last year but the size of this rise will be
\nannounced only after the budget plan is approved by the House of
\nRepresentatives.<\/p>\n
The government's top priorities remain regional development,
\nwith an emphasis on education, health and poverty alleviation to
\nlift an estimated 22 million people, or 11 percent of the
\npopulation, from absolute poverty.<\/p>\n
Overall, the 1997\/1998 draft budget shows another step towards
\na healthy fiscal balance. At the same time it will send the right
\nsignals to the market, and keep the people -- notably the
\nbusiness community -- assured of consistently sound macroeconomic
\nmanagement, despite 1997's heavily political agenda.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/prudent-budget-1447899208",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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