Economists say state budget too optimistic
JAKARTA (JP): The 32.1 percent increase in the 1998/1999 draft state budget unveiled by President Soeharto last night is unrealistic in the current economic situation, according to economists.
"It is overly optimistic and is almost wishful thinking," Indonesian Business Data Center chairman Christianto Wibisono said yesterday.
Economist Bomer Pasaribu and market analyst David Chang shared Christianto's view that the draft budget showed too much optimism amid the monetary crisis.
"It's too brave and it will require very hard work," Pasaribu said.
Chang said such optimism did not seem to go in line with the expectation of the people in the financial and capital markets.
"I think it's just a bit higher than markets expected previously," Chang, the head of research at Trimegah Securities, said.
The budget calls for next year's spending to equal revenue at Rp 133.5 trillion ($33.4 billion at the exchange rate of Rp 4,000 to the dollar) in fiscal year 1998/1999, up from Rp 101.1 trillion this year.
The financial and capital markets previously expected the government to launch a much more conservative budget in fiscal 1998/1999 to cope with the monetary crisis that has hampered the country over the past few months.
Chang said the figures in oil revenues seemed reasonable, but non-oil revenues were not.
This showed that the Indonesian government did not maintain a tight fiscal policy, which would eventually damage the disbursement of the IMF-led financial package in helping the country's ailing economy, he said.
"The IMF wants Indonesia to have a budget surplus," he said.
Director of the Institute for Development of Economics and Finance Didik Rachbini said there was uncertainty over the state budget.
"Uncertainty regarding the draft state budget is even more than in previous years in a situation like this," he told The Jakarta Post.
Didik said the two components which remained uncertain in the draft budget were oil and gas revenues and revenue from foreign loans.
The government estimates its revenues from oil and gas will rise 83.5 percent.
The estimate was based on the price of crude oil at US$17 per barrel and with the exchange rate set at Rp 4,000 against the dollar, he said.
Yesterday, the rupiah continued to decline to almost 8,000 against the greenback.
He said spending for loan repayments rose 57 percent because of the dollar's sharp rise in value and also because of the large amount of the loans.
"A third of our spending is to repay loans, he said, and this will reduce spending in development," he said.
He said the government's role in the economy was to finance the development of smaller areas and informal sectors to eliminate poverty.
However, half the amount of spending in the state budget would go toward routine spending, such as salaries and loan repayments, instead of development, he said.
Responding to the remarks made by Minister of Finance Mar'ie Muhammad that the government would make an effort to create a 1 percent surplus in the budget, Didik questioned where the surplus would come from.
"They cannot lift the fuel subsidy to have a surplus in the budget. It's too hard. It must be done when the situation returns to normal," he said.
Pasaribu, the chairman of the Center for Labor and Development Studies, said the budget was stagnant.
Pasaribu said the slight expansion in the budget was too small to have a significant impact.
The flat budget would result in a scarcity of jobs this year, he said.
"Even with an optimistic projection, the level of unemployment would continue to rise this year," he said.
He predicted unemployment would rise by over 11 percent, including those who worked less than an hour per day.
The percentage of unemployed, including disguised unemployment, would be about 51 percent this year, up from 45 percent last year, he said.
According to the Central Bureau of Statistics, the unemployed made up 38 percent of the total population in 1996.
Last year, about 40 million people were unemployed, of which 8.9 million worked less than an hour per week, he said.
He estimated the unemployed would total about 47 million people this year.
This meant out of the 200 million people in the country, only 44 million would be productive, he said.
"One person will have to support an average of 4.5 people," he said.
Christianto said the government's estimate, on which the budget was based and the rupiah's value kept at 4,000 against the U.S. dollar, was also overconfident.
"The regional fever is not over yet. In the midst of this optimism, the rupiah continues to plunge," he said. (aly/das/rid)
Table: 1997-98 state budget and draft 1998-99 state budget (Rp billion)
REVENUES 1997-98 1998-99 % change
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A. DOMESTIC REVENUES 88,060.7 107,687.9 22.3
I. Oil and natural gas 14,871.1 27,286.4 83.5
1. Oil 10,688.2 18,869.7 76.5
2. Natural gas 4,182.9 8,416.7 101.2
II. Non-oil and non-gas 73,189.6 80,401.5 9.9
1. Income tax 29,117.7 26.337.0 -9.5
2. Value added tax 24,601.4 27,830.0 13.1
3. Import duties 3,321.7 3,179.8 -4.3
4. Excise tax 4,436.3 4,649.6 4.8
5. Export tax 100.0 110.0 10.0
6. Property tax 2,505.0 3,411.0 36.2
7. Other taxes 632.5 540.0 -14.6
8. Non-tax receipts 8,225.8 14,344.1 74.4
9. Fuel sales profit 249.2 0.0 -100.0
B. DEVELOPMENT REVENUES 13,026.0 25,804.0 98.1
I. Program aid -- 6,800.0 0.0
II. Project aid 13,026.0 19,004.0 45.9
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TOTAL 101,086.7 133,491.9 32.1
EXPENDITURES 1997-98 1998-99 % change
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A. ROUTINE EXPENDITURES 62,158.8 92,384.0 48.6
I. Civil services 21,192.0 21,887.4 3.3
1. Salaries/pension 17,048.4 17,405.7 2.1
2. Rice allowances 1,309.5 1,323.5 1.1
3. Food allowances 1,233.7 1,237.0 0.3
4. Other benefits 1,009.9 1,154.6 14.3
5. Diplomat services 590.5 766.6 29.8
II. Goods procurement 8,895.2 10,738.9 20.7
1. Domestic 8,478.0 10,059.7 18.7
2. External 417.2 679.2 62.8
III. Subsidies to regions 11,535.8 12,283.9 6.5
1. Personnel expenses 10,967.8 11,600.7 5.8
2. Non-personnel expenses 568.0 683.2 20.3
IV. Debt Service Payment 19,570.9 32,086.7 64.0
1. Domestic 334.2 1,846.7 452.6
2. External 19,236.7 30,240.0 57.2
V. Other expenditures 964.9 15,387.1 1,494.7
1. Petroleum subsidies 0.0 10,077.6 0.0
2. Others 964.9 5,309.5 450.3
B. DEVELOPMENT EXPENDITURES 38,927.9 41,107.9 5.6
I. Rupiah financing 25,901.9 22,103.9 -14.7
II. Project aid 13,026.0 19,004.0 45.9
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TOTAL 101,086.7 133,491.9 32.1
Source: The Ministry of Finance