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)