The crisis budget<\/p>\n
The 1999\/2000 State Budget starting in April will remain a
\ncrisis-spending program albeit to a lesser degree than the
\ncurrent one. The bulk of the budget will still go to routine
\noperating expenditures and social safety-net programs. The
\nmassive bank restructuring and preparations for, and holding of,
\nthe general election in June will take up another sizable piece
\nof the budget, leaving a tiny portion for investment
\n(development).<\/p>\n
Also similar to the current budget, the next one will be
\nheavily influenced by politics, notably the legislative election
\nin early June and presidential election in November.<\/p>\n
However, preparations for the next budget seem to be much
\nbetter and based on more realistic assumptions, unlike the
\npresent one which had to be revised several times because of the
\narrogance on the part of the now bygone Soeharto administration,
\nwhich stubbornly refused to acknowledge and factor in the
\neconomic crisis in its spending plan.<\/p>\n
More encouraging to note is what is likely to be the first
\nreal sign of greater transparency in the budget-making process.
\nFor the first time in over 30 years, the government publicly
\nannounced most of the key assumptions used for its budget
\nproposal more than five weeks before it will be unveiled to the
\nHouse of Representatives. Under Soeharto's New Order
\nadministration, such key indicators were disclosed only when the
\nPresident revealed the budget proposal to the House in the first
\nweek of January.<\/p>\n
Economic assumptions for the next State Budget, as announced
\nby finance minister Bambang Subianto last week, appear to be
\nfairly realistic. The rupiah's exchange rate is envisaged at an
\naverage 7,500 to the dollar, up from the 9,500 average for the
\ncurrent fiscal year. Inflation is projected at between 15 percent
\nand 20 percent, down from more than 76 percent this year, and the
\nbudget deficit at 6 percent of the gross domestic product,
\nagainst 8.5 percent in the current fiscal year. International oil
\nprices are projected at a range of $11.50 to 12.50\/barrel.<\/p>\n
Gross domestic product growth is projected around plus or
\nminus 1 percent, meaning that economic activities will expand by
\na range of 14 percent to 16 percent from the drastic shrinkage of
\nabout 15 percent predicted this calendar year.<\/p>\n
Another development which will be a great boon to the economy
\nis projected interest rates of between 20 percent and 30 percent,
\ndown sharply from as high as 70 percent in September and 38
\npercent last week. It will go a long way in greasing the wheels
\nof the economy, especially because bank lending, virtually at a
\nstandstill now, will likely resume soon after the completion of
\nthe bank recapitalization program scheduled for the end of March.<\/p>\n
As private investments will likely remain on hold at least
\nuntil the appointment of a new administration later next year,
\nand while the public sector, preoccupied with its contingency-
\nspending plan, cannot make any meaningful investment, bank
\nlending then will become the main source of the lifeblood --
\nliquidity -- to the economy. It was therefore not an exaggeration
\nfor the finance minister, the central bank's governor and the
\nchief economic minister to assert last week that the bank
\nrecapitalization program is crucial for economic recovery.<\/p>\n
Progress in the settlement, or rather the restructuring, of
\nthe huge corporate foreign debt will be vital for keeping the
\nrupiah stable around the current levels of 7,400-7,500. A stable
\nrupiah is in turn a key to sound budget planning.<\/p>\n
Though the stronger rupiah will help decrease price subsidies
\nfor such imported commodities as rice, soybeans and fuel, the
\n1999\/2000 budget will still be much larger than the current one
\nto cover spending for broader social safety net programs,
\ninterest rate subsidies for credits to farmers and small firms,
\nthe costs of bank restructuring and preparations and holding of
\nthe general election. A likely increase of at least 20 percent in
\nthe salaries of civil servants and members of the Armed Forces,
\nthough negligible in real terms in view of the more than 76
\npercent inflation this year, will add significantly to the
\nbudget.<\/p>\n
As revenues will, at best, remain stagnant, the coming state
\nbudget, like its predecessor, will depend largely on
\ninternational aid funds, notably those from the International
\nMonetary Fund, World Bank and Asian Development Fund and Japan.<\/p>\n
However realistic and conservative the assumptions seem to be,
\nthe biggest pitfall to all the estimates lies in the political
\nfield. Uncertainty in the run-up to legislative elections is
\nstill highly likely, a factor which ultimately keeps investors
\nclear of the country.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/the-crisis-budget-1447893297",
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