Deficit could expand to 1.5% of GDP
Deficit could expand to 1.5% of GDP
Urip Hudiono and Leony Aurora, The Jakarta Post, Jakarta
The 2004 budget deficit could increase slightly to 1.5 percent of
the gross domestic product (GDP), as fuel subsidy costs remain
under pressure from soaring oil prices, the finance minister
said.
"This year's deficit target of 1.3 percent is no longer
attainable and will certainly be surpassed," Minister of Finance
Yusuf Anwar said on Wednesday.
"But the final deficit will still be manageable, reaching
somewhere between 1.3 percent and 1.5 percent at the most."
The previous administration handed down to the current
government deficit targets of Rp 26.3 trillion (US$2.9 billion)
for 2004 and Rp 16.9 trillion, or 0.8 percent of GDP, for the
2005 draft budget, although this latter figure is still subject
to revision.
Last year's budget deficit was Rp 33.7 trillion, slightly
below the Rp 34.4 trillion target, or 1.9 percent of GDP.
The government newly installed in October is facing
difficulties in meeting the deficit target amid the trend of
soaring global oil prices.
Oil prices shot up recently to as high as $50 a barrel,
quadrupling the politically sensitive fuel subsidy expenses to Rp
59.3 trillion -- even after the previous administration had
revised its oil price assumption in the budget from $22 to $24.
"...It now depends on how the government keeps its spending in
check and pushes more revenues by the end of the year," Yusuf
said. "We will also adjust fuel prices, though we will assess
which (fuel products) would affect the public the most."
Among the government's last resorts to push revenues is to
haul in as much cash as possible from taxes, customs and excise.
Director General of Customs and Excise Eddy Abdurachman
acknowledged that the government had requested his office to
increase excise revenues from the immense tobacco industry by Rp
800 billion this year.
"We are confident we can meet the request, as (tobacco)
production has increased this year, while we have also launched
operations to prevent revenue leakages," he said.
Eddy said customs revenue as of Nov. 15 reached Rp 10.4
trillion, or 88 percent of its Rp 11.8 trillion target, while
excise revenue stood at Rp 24.8 trillion, or 87 percent of its Rp
29.1 trillion target.
Meanwhile, Director General of Taxation Hadi Purnomo said tax
revenues as of Nov. 22 had reached Rp 193.1 trillion, or 81
percent of its Rp 238 trillion target.
In addition, the finance ministry recently announced that it
would issue its final batch of domestic bonds this year, worth Rp
1.7 trillion, and that it would sell its shares in Bank Permata
and Bank Niaga to help finance the budget deficit.
State Minister of State Enterprises Sugiharto has requested
top state-owned enterprises (SOEs) to increase their dividend
payments to meet this year's Rp 9.1 trillion target. Dividend
revenue from SOEs has reached Rp 8.6 trillion as of October.
Commenting on the widening deficit, Citibank economist Anton
Gunawan was perplexed by the statements from finance ministry
officials, which contradicted their previous statements that the
original deficit target was still achievable.
"It is also odd that the government has chosen not to issue
more bonds, if they really need more money to plug the deficit,"
he said.
Anton, however, was not worried about the situation, as an
additional 0.2 percent deficit would be too small to affect the
overall macroeconomic state.
Meanwhile, Dradjat H. Wibowo of the Institute for Development
of Economics and Finance (Indef) said a rise in deficit was
likely, as the government had no more time to boost revenues.
He advised the government not to cut fuel subsidies, however,
as "the political cost would be too high".