Finance minister rules out devaluation measure
JAKARTA (JP): Minister of Finance Mar'ie Muhammad gave assurances yesterday that the government will not devalue the rupiah or take other radical steps to offset the deficit caused by the fall in oil prices, which is likely to continue to be a problem this fiscal year.
"There will be no drastic measure to stabilize the monetary system," the minister told newsmen following a meeting with President Soeharto at the Bina Graha.
He acknowledged that faltering oil prices will affect the state budget, but he said that the government is prepared to handle shortfalls in revenue from the oil and gas sectors.
The government's budget expects Rp 12.85 trillion (US$6.11 billion) from oil and gas, which is to account for 18.5 percent of estimated total state revenue of Rp 69.74 trillion ($33.2 billion).
The estimate on the receipts from oil and gas is based on an average oil price of $16 per barrel, far higher than the actual price which is currently fluctuating between $13 and $14 a barrel.
No end to glut
Oil experts see no end to the glut in sight, with some predicting that oil will drop as far as $10 per barrel.
Mar'ie said that a devaluation had been discussed with the Budgetary Commission of the House of Representatives (DPR), but firmly rejected it as an option.
Mar'ie's statement on the government's resolve to stay the course has been repeated several times to reassure those left gun shy by the actions of former finance minister J.B. Sumarlin.
These included the 45-percent rupiah devaluation in September 1986, in order to handle falls in state revenues from oil and gas, and the withdrawal of Rp 10 trillion (US$5 billion) from the accounts of state-owned companies in 1990 to push down inflation.
Mar'ie said yesterday that the government will reduce spending or draw from its reserves if a deficit is run again.
The government has set aside around Rp 3.5 trillion ($1.6 trillion) in budgetary reserves for emergency purposes. Part of this will be used to offset last year's RP 1.8 trillion deficit.
"We could use the reserves again if the state revenues in the current fiscal year do not meet the projection," the minister said.
Borrowing
Meanwhile Coordinating Minister for Economy and Finance Saleh Afiff said yesterday that the government will not change its policy on commercial offshore loans.
"There will no change in the government's monetary policies, including that on the control of the inflow of commercial offshore borrowing," he told newsmen following a ministerial meeting on the economy at his office.
Afiff said the strict control of commercial loans is essential to maintain the balance of payment at a safe level.
The government-set annual ceiling on offshore commercial loans of about $5.6 billion to $6.5 billion applies until the next fiscal year.
The ceilings on foreign loans to the central bank, state banks and private banks are set at $500 million, $1 billion and $500 million a year, respectively.
Private companies under the existing ceilings are allowed to borrow up to $2.8 billion from foreign creditors in this fiscal year and up to $2.9 billion in 1995-96, while state companies may borrow up to $1.4 billion in 1994-1995 and up to $1.6 billion in 1995-96.(hen)