Account deficit worries House

Account deficit worries House

JAKARTA (JP): The House of Representatives again expressed its concern over the deepening of the country's current account deficit, which it described as a structural problem of Indonesia's economy which will remain a problem for years to come.

"Considering various global developments, it can be predicted that the current account deficits will remain a structural problem in our economy in the coming years," the House speaker, Wahono, said here Wednesday when closing parliamentary sessions for the current fiscal year.

He recognized that the problem of account deficits is a general sign of a dynamic economy. However, he noted that when the deficit expands too quickly, the government has to take necessary measures to curb it.

The government projects that the current account deficit may increase to US$7.9 billion for the 1995/1996 fiscal year ending this month from $3.49 billion last fiscal year.

The original estimate of the account deficit for the current fiscal year was $4.05 billion.

For the next fiscal year, the account deficit is projected to shrink slightly to $6.87 billion.

Wahono noted that factors which cause the increase of current account deficits are the continuously increasing deficit in services, especially in sea transportation and finance, and the decreasing trade surplus due to the sharp growth of imports.

The government has projected that the deficit in the international trading of services is likely to rise to $13 billion this fiscal year from $11.5 billion last fiscal year. For the next fiscal year, the deficit in services is projected to rise further still, to $14.67 billion.

Indonesia's trade surplus fell by 41 percent to US$4.75 billion last year from $8.07 billion in the previous year. Total exports grew by 13.4 percent to $45.42 billion last year from $40.05 billion in 1994, while last year's imports soared by 27 percent to $40.66 billion from $30.98 billion in 1994.

Hidden costs

At a plenary session earlier Wednesday, spokesman for the ruling Golkar faction Boy Musbar Nurmawan indicated that the decreasing trade surplus had been caused by the high imported content of the country's export commodities as well as its high cost economy, the result of both levies and the demanding of bribes.

"It is imperative to develop export commodities with high local content and market potential," Boy was quoted by Antara as saying.

Meanwhile, spokesman for the United Development Party faction Sa'di Zen Noor suggested that the government closely evaluate every investment project, be it foreign or domestic, in terms of its dependency on imported supplies.

"We are lucky that the flow of foreign direct investment into the country is quite high. However, such investment has driven high imports, as investment requires imported capital goods as well as of raw and supporting materials," Sa'di told the plenary session.

At Wednesday's plenary session, the House passed the bill on the amendment of the government's budget for the current fiscal year into law.

Minister of Finance Mar'ie Muhammad explained at the session that the current budget is estimated to enjoy a surplus of Rp 375.3 billion (US$160 million), because revenues are estimated to reach Rp 82.72 trillion, while spending is likely to reach only Rp 82.35 trillion.

The current budget was originally envisaged to balance at Rp 78.02 trillion.

Mar'ie explained that funds collected from domestic sources were estimated to contribute Rp 71.55 trillion to the government's total revenues of Rp 82.72 trillion, which indicates an increase of Rp 5.9 trillion from the original budget. Meanwhile, foreign revenues are projected to decline by Rp 859 billion from the original budget.

He said the increase in domestic revenues results from unexpectedly higher tax and non-tax receipts as well as higher receipts from the oil and gas sector.

Tax revenues are projected to reach Rp 48.42 trillion, 7 percent more than the original target; non-tax revenues are estimated at Rp 7.8 trillion or 20.2 percent above the target, while the oil and gas sector is projected to contribute Rp 14.8 trillion or 11.8 percent more than the original estimate. (rid)