Finance minister rules out devaluation measure

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)