Committee approves higher spending

Urip Hudiono and Rendi A. Witular, The Jakarta Post, Jakarta

A working committee of the House of Representatives' Budget Committee late on Tuesday approved the 2006 state budget's basic assumptions that include higher expenditures on development projects to stimulate the economy grow by 6.1 percent.

Total expenditure for next year was set at Rp 644.7 trillion (about US$64.47 billion) -- including Rp 54.3 trillion for the fuel subsidy -- about 20 percent higher than the Rp 539.4 trillion initially proposed.

If it materializes, next year's economic growth would be the fastest since the financial crisis of 1998, when Indonesia's economy contracted by 13 percent.

This year, the economy is expected to expand by 5.7 percent.

Other assumptions include an inflation rate of 8 percent, a U.S. dollar exchange rate of Rp 9,900, oil prices at $57 a barrel, oil production at 1.050 million barrels per day (mbpd) and the central bank's SBI rate at 9.5 percent, with a deficit set at 0.7 percent of the country's gross domestic products (GDP).

On the revenue side, the government expects to rake in Rp 625.2 trillion in total revenue -- the lion's share of which will come from income tax at Rp 416.3 trillion.

All the figures still have to be approved by a House plenary session scheduled for Oct. 27.

Despite already targeting fairly high growth, the government has proposed even higher expenditures that will mostly be allocated to development projects, in order to boost growth by 0.3 percent.

"The government is proposing higher expenditures of some Rp 15 trillion, so that we can stimulate economic growth even higher," Minister of Finance Jusuf Anwar told lawmakers.

"We plan to develop labor-intensive infrastructure projects including roads and irrigation," he added.

The legislators are yet to give their approval, although Jusuf admitted that the move would come at the expense of a wider budget deficit, which he said could widen to 1.1 percent of GDP.

Head of the ministry's Economics, Financial and International Collaboration Studies Agency, Anggito Abimanyu, said earlier in the day that the government would indeed put more emphasis on efforts to generate higher growth for next year.

"We want this 2006 budget to be more expansive, meaning it can accommodate higher expenditures for development," he said after a meeting with Vice President Jusuf Kalla.