Fiscal deficit may decline to 0.5%: VP

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.