Government again revises crisis budget
JAKARTA (JP): The government announced yesterday another revised version of the 1998/1999 State Budget to accommodate a further deterioration in the economy and a huge subsidy commitment.
Delivered by Minister of Finance Bambang Subianto to the House of Representatives (DPR), the budget forecasts a shrink in the economy by 12 percent during the fiscal year ending March 31, 1999, with inflation of 66 percent.
The previous budget, issued January 23 as a revision of the original announced earlier the same month, had forecast zero growth and inflation of 20 percent.
Finalized after consultations with the International Monetary Fund, the new budget estimates an average exchange rate for the rupiah at Rp 10,600 to the dollar over the fiscal year, against the earlier assumption of Rp 5,000.
It was changed to bring it in line with a letter of intent signed with the IMF last month.
Bambang said the revision was needed because the economy had further weakened due to the sharp depreciation of the rupiah, rising inflation and lower international oil prices.
The oil price assumption is now set at US$13 per barrel, compared to $17 in January.
The total budget for 1998/1999 is enlarged to Rp 227.1 trillion, a 88.2 percent increase from the January version of Rp 142.7 trillion.
The bulk of the budget is aimed at financing the social safety net to help the poor in surviving the crisis and debt repayment.
In an agreement with the IMF last month, the budget deficit was allowed to amount to 8.5 percent of the gross domestic product to finance various subsidy commitments.
The routine expenditure is increased to Rp 61.6 trillion from Rp 12.3 trillion due to an increase in the fuel subsidy from Rp 7.5 trillion to Rp 27.5 trillion and to anticipate increasing subsidies for basic food items.
The allocation for government debt repayment is also increased to Rp 94.5 trillion from Rp 39.7 trillion. The budget sets Rp 77.55 trillion for foreign debt servicing, including about Rp 46.51 trillion for principal repayment, and more than Rp 31 trillion for interest payments.
On the revenue side, foreign aid revenue is revised to Rp 127.8 trillion from Rp 32.3 trillion.
Revenue from the non-oil and gas sector is also revised to Rp 99.6 trillion from Rp 80.4 trillion, primarily on the back of larger tax revenue from the export of crude palm oil (CPO).
Last week, the government increased the tax export for CPO products up to 60 percent from 40 percent previously.
Revenue from oil and gas was raised to Rp 49.71 trillion from Rp 34.58 trillion.
Indonesia is a major oil exporter and CPO producer.
The budget also forecast the 1998/1999 current account surplus at $1.42 billion, or 1.6 percent of GDP, exports at $56.55 billion and imports at $37.88 billion.
Previously, the current account surplus was set at $2.63 billion, or 1.8 percent of GDP, with exports of $60.59 billion and imports of $42.43 billion.
Bank loans are expected to grow at 24.5 percent compared to the earlier target of 17 percent.
Money in circulation, which was earlier expected to decline by 1.4 percent, is now projected to grow by 18.5 percent.
The balance of payment is also expected to book a surplus of $5.3 billion.
It was previously projected at $1.1 billion. (rei)
Table A: REVISED BALANCE OF PAYMENTS PROJECTIONS 1998/99 (in billion U.S. dollars)
OLD NEW
Merchandise exports 60.6 56.5
Merchandise imports -42.4 -37.9
Trade balance 18.2 18.6
Services -15.5 17.2
Current Account balance 2.6 1.4
Capital flow
Government receipts 9.1 19.4
Govt debt payments -4.9 -4.2
Others -5.6 11.3
Capital Account balance -1.4 3.9
Overall balance 1.1 5.3
Note: Some figures don't add up due to rounding up.
Source: From Minister of Finance's statement at the House of Representatives, July 16, 1998.
Table B: REVISED TARGETS IN GOVERNMENT'S 1998/99 BUDGET (in trillion rupiah)
REVENUES OLD NEW CHANGE
Domestic Revenues 115.00 149.30 29.8%
Oil and gas 34.58 49.71 43.7%
Non-oil and non gas 80.34 99.60 23.97%
Including:
Income Tax 25.62 25.84 0.85%
Value Added Tax 27.87 28.94 3.83%
Import Duties 5.50 3.56 -35.28%
Export Tax 0.11 0.94 854.54%
Excise Tax 4.92 7.80 58.53%
Property Tax 3.41 3.41 0%
Other Taxes 0.54 0.54 0%
Non-Tax Receipts 14.34 26.70 86.19%
Development Revenues 32.25 127.80 96.27%
Program Aid 8.50 87.30 927.05%
Project Aid 23.75 40.50 70.52%
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TOTAL 147.22 277.14 88.24%
EXPENDITURES OLD NEW CHANGE
Routine Expenditures 97.82 205.50 110.07%
Including:
Civil services 22.60 24.80 9.73%
Subsidies to regions 12.28 13.30 8.30%
Debt Service Payment 39.74 94.50 137.79%
Petroleum subsidies 7.45 27.50 269.12%
Other subsidies 4.85 34.02 601.44%
Development Expenditures 49.40 71.60 44.93%
Rupiah financing 25.63 31.10 21.34%
Project aid 23.80 40.50 70.16%
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TOTAL 147.22 277.14 88.24%
ASSUMPTIONS USED: OLD NEW
Rupiah/dollar rate Rp 5,000 Rp 10,600
Economic growth 0 percent -12 percent
Inflation 20 percent 66 percent
Average oil price $17/bbl $13/bbl
Credit growth seen at 17 percent 24.5 percent
Source: Compiled from Minister of Finance statement's before the House of Representatives, July 16,1998.