2003 deficit under control, below target: Govt

The Jakarta Post Jakarta

The government posted a state budget deficit in 2003 that was slightly below target, in what Minister of Finance Boediono said on Friday was a reflection of the government's continued fiscal discipline.

"In general, the 2003 budget realization was in line with the government's targets," Boediono said.

The budget deficit stood at Rp 33.7 trillion (about US$400 million) last year, slightly below the original target of Rp 34.4 trillion, thanks in part to the government's success in keeping spending in check.

The deficit accounted for 1.9 percent of gross domestic product, which matched the target set in the state budget.

Since the financial crisis struck in 1997, the annual state budget has run a deficit, the result of the huge payouts the government had to make to bail out the near-bankrupt banking sector.

No less than Rp 600 trillion was injected into the sector, forcing the government to service huge annual interest payments.

The budget deficits have forced the government to continue to seek new loans from international donors -- a move seen to have dragged the country into a deep debt trap.

Friday's announcement, however, confirmed that the government is on the right track in gradually lowering the deficit. In 2001, 2002 and 2003, the government posted deficits of 3.7 percent (of GDP), 2.5 percent and 1.9 percent, respectively. The government expects to have a balanced state budget by 2006.

Aside from foreign financing, other sources the country has used to cover the deficit are proceeds from the sales of assets under the Indonesian Bank Restructuring Agency (IBRA) and the privatization of state-owned companies, as well as bond issues.

As for this year, the government expects to continue the trend by setting the deficit at Rp 24.4 trillion, or 1.2 percent of GDP.

There is concern, however, that the lower-than-expected deficit could be caused by the slow progress in a number of development projects.

Boediono also said that in 2003, the government raked in Rp 341.1 trillion in revenue, slightly lower than the target of Rp 342.8 trillion, while expenditures amounted to Rp 374.8 trillion, also below the target of Rp 372.2 trillion.

The finance ministry also predicted that the economy in 2003 expanded by 4.1 percent, slightly higher than the target of 4 percent.

This was in line with the central bank's announcement a day earlier that economic growth was 4 percent last year.

The official calculation of the country's economic growth is being made by the Central Statistics Agency, with the result scheduled to be made public later this month.

For 2004, the government is forecasting economic growth of 4.8 percent.

Indonesia's economy needs to expand by about 6 percent to 7 percent annually to cut unemployment in the country. With only 4 percent growth, about 1.2 million new workers each year will fail to find work, on top of the 40 million or so already without jobs or underemployed.