Realistic budget<\/p>\n
The 1995-1996 state budget plan is realistic when viewed both
\nfrom the assumptions used to estimate revenues and from the way in
\nwhich the limited financial resources are allocated. The government
\napparently prefers a conservative spending plan to minimize the risk
\nof having to adopt bitter, contingency measures whenever the
\nestimates err.<\/p>\n
The US$16.50 average oil price used for estimating oil and gas
\ntax receipts that account for 17 percent of total revenues is
\nrealistic in that the risk of an overestimate is minimum. It is
\nobviously more convenient to cope with the impact of under-
\nestimates.<\/p>\n
The 12.2 percent increase envisaged in tax revenues from the
\nnon-oil sectors, which will contribute 57.3 percent of total
\nrevenues, is also pragmatic, especially because the largest portion
\nof the increase is expected from the value added tax (VAT). Since
\nthe new tax laws lower income tax to a range of 10 percent to 30
\npercent from 15 percent to 35 percent previously it is indeed
\ndifficult to expect a significant rise in receipts from this direct
\ntax. It will take some time to significantly broaden the tax base.
\nBut because almost all indicators point to robust economic growth
\nagain this year, the 25.8 percent rise expected in VAT receipts is
\nnot too ambitious a target. Differing from income tax, VAT
\ncollection is based on transactions and not on accrued incomes or
\nprofits.<\/p>\n
The most encouraging trend, we think, is the 51.2 percent
\nincrease envisaged in non-tax receipts, consisting mostly of
\ndividends from state companies and service fees collected by the
\nvarious ministries. They are expected to contribute Rp 6.5 trillion
\n($2.95 billion) or 8.3 percent, up from 6.3 percent, of total
\nrevenues. This development indicates significant results in the
\nrestructuring of state companies and the better management of
\nservice fees collected by the various government offices. Hopefully,
\nall other fees or levies, such as reforestation funds, will
\neventually be included and accounted for in the state budget.<\/p>\n
The 17.4 percent rise expected in receipts from foreign loans
\nis encouraging as well because that increase will not be generated
\nby larger new borrowings but by smoother implementation of foreign
\naid. That development certainly results from much more expedient
\nbudgetary procedures. That is another benefit from speedier
\nimplementation of foreign loans which are mostly tied to specific
\nprojects. The commitment fees (usually amounting to 0.75 percent) on
\nthe undisbursed loans that have to be paid by the government every
\nyear will be reduced.<\/p>\n
The government decision to raise the salaries and pensions of
\nthe civil servants and Armed Forces members by 10 percent, in spite
\nof the tight budget, is very wise. Even though the nominal increase
\nis rather insignificant, given the 9.24 percent inflation last year,
\nthat measure will at least prevent further worsening of the living
\nconditions of the government personnel. The official pledge to
\ndevelop a clean and credible administration will sound a joke if the
\ngovernment personnel become poorer amid the steady economic
\nexpansion.<\/p>\n
The mere 1.4 percent increase in foreign debt installments and
\nservice payments is another impressive trend. This welcome
\ndevelopment results from the wise government measure to amortize
\n$800 million of its foreign debts to the World Bank and the Asian
\nDevelopment Bank ahead of their maturity dates. Although the amount
\nof the repayment seems rather negligible compared to the $59 billion
\nthe government now owes to foreign creditors, it is still
\nsignificant because the two multilateral agencies charge annual
\ninterest rates of six to seven percent, as against less than three
\npercent charged by government creditors. The more encouraging is the
\ntrend because the $800 million fund was derived from the public
\noffering of 35 percent of state-owned PT Indosat's shares on the
\ndomestic capital market and the New York Stock Exchange. More such
\nfunds are expected from the public listing of several other state
\ncompanies, including PT Telkom, PT Jasa Marga (freeway development)
\nand PT PLN (electricity) within the near future.<\/p>\n
So all in all, we are impressed by the budget proposal because:
\nWe are assured that the budget will not necessitate tougher fiscal
\nand monetary measures; it shows better administration and management
\nof government service fees and levies; its structure is much
\nstronger as it relies increasingly on tax receipts from the non-oil
\nsectors; and state companies not only become more efficient but turn
\nincreasingly from cost into profit centers.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/realistic-budget-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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