Annual budget unveiled today

JAKARTA (JP): President Soeharto is scheduled to propose the 1997/1998 state budget to the House of Representatives today, a budget most analysts expect to remain austere.

Analysts agree that the draft budget would not increase substantially from the current budget of Rp 90.6 trillion (US$38 billion).

They contended that the government would continue to tighten public liquidity in a bid to cool down economic overheating.

Economic overheating is still looming, with widening current account deficits and high inflation rates still haunting the country's macroeconomic management.

The expected small increase in the draft budget for the next fiscal year will most likely be able to stimulate private sector investment and to maintain economic growth of over 7.1 percent per annum.

The President said in his New Year's address that the economy's growth declined to 7.8 percent last year, from 8.2 percent recorded in 1995.

He said the government's efforts to cool down the overheated economy would push down the inflation rate to 6.7 percent, from 8.6 percent in 1995.

This year, Soeharto said, would challenge the government and the private sector alike to achieve high growth without causing overheating. He argued that the world economic situation this year was full of uncertainties.

To achieve high but sustainable growth, all four factions at the House of Representatives proposed late last year that the government raise the 1997/1998 budget by 13 percent over this fiscal year's budget to Rp 102 trillion.

The current budget, which balances at Rp 90.6 trillion, represents a 16.1 percent increase over the previous budget of Rp 78.02 trillion.

The four factions -- the Armed Forces, Golkar, the United Development Party and the Indonesian Democratic Party -- used similar assumptions: oil prices remaining at their current levels, continuing inflow of official foreign loans and steadily increasing tax revenues.

The Armed Forces faction, for instance, projected that Indonesia's crude oil prices would average $16.5 a barrel next fiscal year, receipts from official foreign loans would reach Rp 13.4 trillion and tax revenues would rise 12 percent from the current budget target of Rp 55.99 trillion.

The faction proposed the 1997/1998 budget should be 14.5 percent larger, at Rp 103 trillion, than the current budget.

The Golkar faction predicted the government's domestic revenue from oil and gas would increase slightly to Rp 15 trillion for the next financial year, from Rp 14.1 trillion for the current budget.

The faction projected domestic revenues from non-oil and gas sectors, including tax and non-tax income, would reach Rp 75.6 trillion, up from Rp 64.08 trillion for the current budget.

It proposed the 1997/1998 budget should balance at Rp 102.3 trillion. The proposed budget increase was to augment the government's increasing routine spending.

Golkar's chairman, Harmoko, said in Bali last month that his party would press the government to increase the salaries of 4 million civil servants to improve their standard of living so they could serve the public better.

Minister of Finance Mar'ie Muhammad said earlier that even though the government agreed to increase civil servants' salaries, it would not announce it publicly to avoid inflationary effects.

The United Development Party faction forecasted that Indonesia's oil prices would average between $17 and $18 a barrel next fiscal year, revenue from official foreign loans would remain at the current level of Rp 12.4 trillion and tax revenue would increase 20 percent from the current budget.

The faction proposed the 1997/1998 budget should balance at Rp 102.7 trillion.

The Indonesian Democratic Party faction said the government could further increase tax receipts because the country's tax ratio to gross domestic product was lower compared with those of neighboring countries.

The faction was therefore optimistic the budget for the next fiscal year could balance at Rp 108 trillion, more than 20 percent higher than the current budget of Rp 90.6 trillion.

The 1997/1998 budget proposal will cover the fourth year of the current sixth Five-Year Development Plan period ending in March 1999. (rid)