Economists say state budget too optimistic
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