Corruption fears slow down aid for the poor

Corruption fears slow down aid for the poor

JAKARTA (JP): Worries over leakages and corruption have slowed
down the government's social safety net spending for the poor,
creating a surprising cash surplus in the state budget during the
first five months of the current fiscal year, according to a
government document issued on Tuesday.

The government, however, said in its new letter of intent to
the IMF that the development expenditure would be accelerated
sharply during the second half of the fiscal year, which ends in
March 1999.

"Progress was especially slow in implementing new initiatives
in health, education and employment generation," the document
said.

In addition to administrative delays caused by substantial
revisions in the original state budget, "there was a growing
sense of urgency to strengthen systems of budgetary control and
monitoring to protect against leakages and corruption", the
government said.

The government vowed that it would strengthen the monitoring
of development spending by inviting the public to participate in
the process.

The social safety net program, funded mostly with foreign
loans, is designed to help the country's poor population to
survive the current economic crisis.

The World Bank has repeatedly stressed that preventing the
social safety net program from being abused is a precondition for
future international support to the country.

President B.J. Habibie's administration has been so
apprehensive in implementing the multimillion dollar social
safety net program due to the public's high sensitivity to
corruption and collusion, especially in the wake of massive
corruption allegations aimed at Habibie's mentor, former
president Soeharto, that the program has been running very
slowly.

Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita is also currently in the spotlight
following corruption allegations by U.S. academician Jeffrey
Winters recently.

Bottoming out

The government said in a statement Tuesday that the decline in
the economy was bottoming out and that the rupiah had
strengthened considerably.

It added that the inflation rate should further decline
substantially in the fourth quarter, reflecting the strengthening
of the rupiah and the stabilizing of food prices.

"We expect that there is scope for further gradual reductions
in interest rates in the coming weeks, provided the rupiah
remains strong and inflation falls further as expected," the
government said.

"However, in order not to jeopardize the stability that is
being achieved, the monetary policy will remain flexible and will
be tightened if there are signs that inflation is not declining,
or if the exchange rate weakens," it added.

The rupiah strengthened to more than Rp 7,000 to the U.S.
dollar on Tuesday from over Rp 11,000 last month. Inflation in
September was 3.8 percent, well over rates in the preceding
months.

Komara Djaja, a senior economist at Ginandjar's office, said
the country's budget deficit in the current fiscal year might be
much lower than the 8.5 percent of gross domestic product (GDP),
as earlier estimated, in the wake of improvement in the rupiah
and the lowering of social safety net spending.

"If there aren't any spending surprises, the deficit may only
be about 6 percent of GDP," Komara told The Jakarta Post.

He declined to mention what possible surprises in spending
there could be.

But he added that the lower budget deficit would dissipate
worries that inflation would get out of control. (rei)