Waiting for new budget<\/p>\n
President Soeharto has made it quite clear that the 1995-1996
\nstate budget plan he will propose to the House of Representatives
\ntomorrow will be as austere as the current one. This policy
\ncontrasts strikingly with the prediction of more robust economic
\nexpansion this year. It also points out the diminishing direct
\nrole of the government in economic activities as the private
\nsector increasingly becomes the locomotive of growth.<\/p>\n
Indeed, as the government has transferred the responsibility
\nfor most economic development to the private sector and has
\nreassumed its basic function and role as the administrator,
\nfacilitator and the provider of support services, there is no
\nurgent need for the public sector to make an expansive spending
\nplan. Nor does the government have much leeway in planning an
\never bigger budget, given the increasingly limited capacity of
\nits financial resources.<\/p>\n
First, the receipt account. The international prices of crude
\noil, which, along with natural gas, accounts for one fifth of
\ntotal internal revenues, will most likely hover at the average of
\nUS$16\/barrel for the next fiscal year beginning in April. True,
\nthe average $16 oil price projected for the current fiscal year
\nwas surpassed slightly during the April-December, 1994 period.
\nBut the oil price decline from $17 in November to $16.3 in
\nDecember, which was unusual given the beginning of the winter,
\nsignaled a warning against high projections. Projecting a higher
\naverage oil price for the next budget would risk not only an
\neventually painful correction with its consequent havoc in the
\nmonetary sector, but also might sow seeds of speculative
\nassumptions among the private sector.<\/p>\n
Experiences have shown that in so far as tax receipts from the
\nhydrocarbon sector are concerned it is much safer for the
\ngovernment to err on the conservative side. After all, coping
\nwith a windfall is much less strenuous than covering a big
\nshortfall. Hence, we expect the government to maintain the oil
\ntax receipt estimates on the basis of the $16 average price. That
\nmeans that oil tax receipts may still increase in terms of rupiah
\ndue mainly to the rupiah's depreciation against the U.S. dollar.<\/p>\n
The only significant increase in revenues is expected to be
\ngenerated by tax receipts from the non-oil sectors, which
\ncontribute more than 61 percent of total government internal
\nrevenues. Judging from the record of more than 20 percent annual
\nincreases over the past five years, a rise of more than 25
\npercent is not impossible next fiscal year despite the start-up
\nproblems expected in the enforcement of the new tax laws
\nbeginning this month. Even though the income tax rates were
\nlowered from a range of 20 percent to 35 percent to between 15
\npercent and 30 percent, the broadening of the tax base in terms
\nof both taxpayers and tax objects is expected to more than offset
\nthe impact of the lower rates.<\/p>\n
A nominal increase of up to 15 percent in the total budget
\nvolume, therefore, is highly probable. But that is not a hefty
\nincrease at all, given the inflation of around 10 percent last
\nyear. Such expansion is barely enough to meet the minimum 15
\npercent rise in routine (recurring) spending required next fiscal
\nyear even without an across-the-board increase in personnel
\nsalaries. The increases in expenses will be incurred through the
\nperiodical grade promotions among the government personnel, the
\n10 percent rise in pension pay effected as from this month, the
\nmaintenance and operation costs of newly completed development
\nprojects and the increase of at least five percent in foreign
\ndebt service payments due to the depreciation of the rupiah.<\/p>\n
Budget appropriations for investments (development budget) are
\nestimated to decline again in real terms as they have in the
\ncurrent fiscal year. It is encouraging, though, that the
\nremarkable achievements in the privatization of such basic
\ninfrastructure as power generation and telecommunications will
\nenable the government to focus its limited investments on the top
\npriority sectors of human resources (education, health and social
\nservices) and rural development.<\/p>\n
The consequence of the bare-bones budget is obvious. The bulk
\nof new investments needed to fuel economic expansion will have to
\nbe provided by the private sector. That calls for further
\nimprovement in the overall climate for investments and further
\nreduction of the prevalent hurdles to business activities.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/waiting-for-new-budget-1447893297",
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"sponsor": "Okusi Associates",
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