Fiscal deficit may decline to 0.5%: VP

Rendi A. Witular, The Jakarta Post/Jakarta

The country's state budget deficit may be lower this year than the initial projections as some public works projects have been postponed until next year due to several limiting factors, Vice President Jusuf Kalla said.

"Initially, we had estimated that the budget deficit would reach around 1 percent of gross domestic product (GDP) this year. However, the figure may even narrow to 0.5 percent," said Kalla in a press conference after Friday prayers.

Kalla said the narrowing deficit was partly driven by some project spending that could not be realized this year because of a limited timeframe and new procedures in applying for the projects.

According to the Ministry of Finance, the government has thus far spent some Rp 36.2 trillion (US$3.63 billion), or 40 percent, of the allocated budget for capital, goods and development, which reaches a total of Rp 90.5 trillion.

It is estimated that between 15 percent and 30 percent of the spending will be realized next year.

The $250-billion economy has been running a budget deficit since the Asian financial crisis in late 1997 following its decision to issue debts at a relatively higher interest rates to bail out several ailing banks.

With the debt level declining for the past couple of years as well as a gradual reduction in the burdensome fuel subsidy, the government is optimistic that it could balance the level of its budget by 2007.

Kalla said with the narrowing deficit, it was unlikely that the government would proceed with its initial plan to sell stakes in several state enterprises this year to help plug the deficit.

"Lower deficit and dividend payments from state enterprises, which may reach Rp 15 trillion this year, are deemed enough to cover the state budget. Therefore, privatization is not that urgent for us," he said.

The government is planning to sell some stakes in Bank Mandiri, Bank Rakyat Indonesia and gas utility firm PT Perusahaan Gas Negara to meet the state budget's privatization target of Rp 3.5 trillion this year.

For this year, the government is targeting Rp 8.9 trillion from dividend payments and Rp 3.5 trillion from privatization. However, according to several officials, the dividend payment has already surpassed the target by Rp 3.1 trillion.

The government has proposed a total of Rp 12.5 trillion in dividend payments from state enterprises and Rp 4.5 trillion from their privatization to help reduce the state budget deficit in 2006, which is forecast to be 0.7 percent, or Rp 22.4 trillion.