Wed, 09 Mar 2005

Government to submit two budget revisions

Urip Hudiono, The Jakarta Post, Jakarta

The government will submit revisions to the 2005 state budget twice this year to address changing financial needs, including the Rp 10.5 trillion (US$1.13 billion) welfare program to be financed from the slashed fuel subsidy.

Minister of Finance Yusuf Anwar said on Tuesday the first revision would be proposed to the House of Representatives in April to address the financing needs of a series of programs targeted directly at the poor, the reconstruction of Aceh and the upcoming regional elections.

The first revision will be based on the assumption that expenditures by state institutions will remain the same.

Yusuf said that in the revised budget draft the price of oil would be set by the government at US$35 per barrel from the previous $24 per barrel.

"The deficit will also rise to 1.07 percent," he said.

The deficit was previously set at 0.8 percent of this year's gross domestic product. The government previously revised the rupiah exchange rate from Rp 8,600 to the dollar to Rp 8,900.

The government announced that beginning March 1 it would cut the fuel subsidy, which had grown massive due to soaring global oil prices. To offset the higher fuel prices, the government announced it would take money from the slashed subsidy and channel it into programs targeted at the poor.

However, the funds for these programs cannot be disbursed immediately because it involves a budget revision, which requires the House's approval.

Yusuf said the planned budget revisions would not violate the State Budget Law, which does not specify how many times and when the government can revise the state budget.

"The 'when' is usually at the end of the first semester, sometime in June or July," he said.

However, Yusuf said the revisions still required approval from the House. "That is why we are holding consultation meetings with the House on these revisions to secure its approval."

He hoped the House would approve the April revision quickly, particularly as it concerned the disbursement of funds to assist the poor.

Most of the money for these low-income assistance programs will go toward providing free education, health care and inexpensive rice for the poor, and financing rural infrastructure projects.

Several legislators have expressed opposition to the government's fuel hike policy. They also say the money from the slashed fuel subsidy meant to finance the assistance programs for the poor will be at risk of embezzlement. Legislators hope to question the government about the policy.

Yusuf defended the government's actions, saying if the government did not raise domestic fuel prices it would have had to allocate Rp 60 trillion for the fuel subsidy in this year's state budget.

"That is much more than our budget for education, health and development," he said. "It is obviously unfair, so I hope the House will consider this when considering our proposed revisions."