Budget committee revises state budget plans

Budget committee revises state budget plans

JAKARTA (JP): The joint government-legislature state budget
committee agreed on Monday to revise several assumptions in the
2001 state budget draft.

Legislator Aberson Marle Sihaloho, a member of the committee,
said the exchange rate of the rupiah had been revised to Rp 7,800
to the U.S. dollar compared to the initial assumption of Rp
7,300, and the oil price assumption had been changed to $24 per
barrel from $22.

"But this is still subject to final approval by the plenary
session of the House of Representatives," Aberson said following
a closed-door meeting of the committee.

He said the plenary session was scheduled for Thursday.

Aberson said the revision was made to reflect more "reality".

The government proposed the state budget draft early in
October, but since then the rupiah has dropped to its current
level of about Rp 9,400 to the dollar.

The local unit has fallen due to a combination of domestic
political uncertainty and external factors, including the
strengthening of the dollar against other currencies in the
world.

The international oil price has also been hovering at more
than $30 per barrel.

Experts have also said the rupiah and oil price assumptions in
the state budget draft were not realistic.

Aberson said that members of the committee were also
optimistic that economic growth next year would reach 5 percent
compared to the government assumption of 4.5 percent.

He did not say whether an inflation assumption of 7 percent
and Bank Indonesia benchmark interest rate of 11 percent had also
been revised.

Separately, deputy of the budget committee Abdullah Zainie
said the revision in the budget assumption would inflate the size
of the 2001 state budget to about Rp 300 trillion compared to the
initial proposal of Rp 295 trillion.

Elsewhere, Aberson said the committee had proposed to reduce
the outstanding government bank recapitalization bonds by about
Rp 20 trillion next year in a bid to lower the burden of the
state budget in covering the interest rate of the bonds.

"IBRA is still calculating," he said, referring to the
Indonesian Bank Restructuring Agency (IBRA).

Aberson said that under the plan, the recapitalized banks
would be allowed to exchange part of the bonds with performing
bank loans held by IBRA.

"Our main concern now is how to lower the state budget burden
to finance the interest of the bonds," he said.

The government has issued about Rp 650 trillion worth of bank
recapitalization and restructuring bonds.

The interest cost of the bonds is estimated to reach Rp 55
trillion in 2001.

The government recently reached an agreement with Bank
Indonesia for the latter to cover about Rp 24.5 trillion of the
bonds.

Aberson said this would reduce the amount of the outstanding
bonds, but the budget committee wanted a further reduction by
exchanging the bonds with the performing loan asset under IBRA.

The agency has been targeted to raise about Rp 27 trillion in
cash next year from the sale of its various banking assets to
help finance the state budget deficit.

IBRA has received more than Rp 600 trillion worth of various
assets from closed banks and recapitalized banks, including about
Rp 260 trillion of nonperforming loans. IBRA is mandated to
restructure the loans.

Abdullah said the committee had asked IBRA to raise its cash
target to about Rp 30 trillion.

Aberson also said the members of the budget committee had been
determined to push the government not to use new foreign loans
when possible in financing the 2001 budget deficit estimated at
about $6 billion.

He said new foreign loans would only create more burden for
the people.

The Consultative Group on Indonesia (CGI), the country's
traditional donor group, agreed recently to provide $4.8 billion
in a loan to help finance the state budget deficit.

"The government will not use the loan if it is not needed,"
Aberson said.

He said the budget deficit could be reduced by postponing
several projects.

Government officials attending the meeting declined to provide
comments, saying that the talks were confidential and must be
approved first by the House plenary session.(rei)