2006 budget sets sights on 6.5% GDP growth, 0.7% deficit

Urip Hudiono, The Jakarta Post/Jakarta

The House of Representatives's Budget Commission has agreed on the assumptions to be used in next year's budget.

The assumptions include economic growth of up to 6.5 percent and a budget deficit of 0.7 percent of gross domestic product (GDP).

In a hearing late on Thursday with Minister of Finance Jusuf Anwar, State Minister for National Development Planning Sri Mulyani Indrawati and Bank Indonesia (BI) deputy governor Hartadi A. Sarwono, the commission also agreed on an inflation rate assumption of between 4.5 percent and 6.5 percent for next year and a rupiah range of between Rp 9,000 and Rp 9,400 to the U.S. dollar.

The country's oil production, meanwhile, is expected to reach between 1.075 and 1.125 million barrels per day (mbpd), with the oil price assumption being in a range of between $40 and $45 a barrel.

Legislator Amin Said Husni, who heads the commission's macroeconomic assumptions deliberation team, said the higher GDP growth between 6 percent and 6.5 percent -- as compared to the government's 5.5 percent to 6.5 percent proposal -- was based on the consideration that Indonesia's economy would benefit from expected increasing global trade and growth next year.

"The country's political and economic stability, as well as higher exports and investment on the back of improved infrastructure and a better investment climate, will also contribute to the growth," he said.

The commission has requested that the government continue maintain its current fiscal policy in next year's budget, including its plan to decrease the deficit to 0.7 percent of GDP and the country's debt ratio to between 41.3 percent and 43.3 percent of GDP.

The 2005 budget envisages the deficit at 0.8 percent of GDP and the debt ratio at 47.5 percent.

"The commission has also given the green light to the government to maintain its fuel subsidy policy as it is, and seek additional revenues of Rp 12.5 trillion from the profits earned by state-owned enterprises, and another Rp 3.5 trillion from privatizations," Said explained.

----------------------------------------------------------------

2006 State Budget macroeconomic assumptions: ----------------------------------------------------------

2005 Govt Commission

budget proposal approval ---------------------------------------------------------- GDP growth (%) 6.0 5.5-6.5 6.0-6.5 Inflation (%) 7.5 4.5-6.5 6.5-8.0 Exchange rate (Rp/US$) 9,300 8,800-9,200 9,000-9,400 SBI rate (%) 8.0 6.5-8.5 7.0-8.5 Oil price (US$/barrel) 45 40-45 40-45 Oil production (mbpd) 1.125 1.075 1.075-1.125 ---------------------------------------------------------- Source: Budget Commission ----------------------------------------------------------