Government forecasts Rp 53t deficit in 2001 budget

JAKARTA (JP): The government forecast the deficit in the upcoming 2001 state budget, beginning in January, to increase to Rp 53 trillion (US$6.39 billion) compared to the estimated Rp 44 trillion for the current 2000 state budget.

Director General of State Budget Anshari Ritonga said on Tuesday that the size of government spending in the upcoming budget was estimated at Rp 283.3 trillion, while domestic revenue was only at Rp 230.3 trillion, resulting in the deficit.

Anshari said Rp 99.3 trillion (40 percent) of the total spending would go to servicing the government's domestic and foreign debts.

He said that the deficit was still large despite the planned reduction in the fuel subsidy because of the greater burden of financing the government's bank recapitalization program and of servicing official foreign debts.

The deficit is expected to be financed using the proceeds from the sale of state companies, the sale of assets under the Indonesian Bank Restructuring Agency (IBRA), and foreign loans. The government is scheduled to meet international donors grouped in the Consultative Group on Indonesia (CGI) next month in Tokyo.

Anshari was speaking on the second day of a meeting between Finance Minister Prijadi Praptosuhardjo and the House of Representatives' budgetary committee to discuss preparations for next year's budget.

The 2001 budget will be the first based on a calendar year. Previously the state budget ran from April to March. The current budget, a transitional one, runs only from April to December.

The newly-appointed finance minister mostly played a "mediator's" role during the session, instructing the ministry's senior officials to answer questions or respond to criticism from legislators.

Prijadi, a career banker and a close friend of President Abdurrahman Wahid, was appointed last month in a major cabinet reshuffle. But his appointment raised controversy particularly as he had earlier failed to pass the central bank's fit-and-proper test of his ethical and professional qualifications to lead state-owned Bank Rakyat Indonesia.

Several legislators, particularly those from the major political parties represented in the new Cabinet, had earlier planned to give Prijadi a hard time during the meeting.

The only serious remarks he made during the meeting, the first since his appointment, was a rejection of calls from several legislators for the government to create a fiscal stimulus in the state budget.

"It is not right to expect the government (to create a huge stimulus for the economy) because of the limited budget," Prijadi said.

The President is expected to deliver to the House the full version of the 2001 state budget draft next month to be debated.

Designing the upcoming state budget is one of the most pressing tasks on the agenda of the new finance minister.

Senior officials at the finance ministry said that despite the huge deficit, around a third of the budget would be used to finance the cost of the government's bank recapitalization program and to service foreign loans.

Director general of financial institutions at the finance ministry Darmin Nasution said that around Rp 56.3 trillion of the 2001 state budget or nearly 20 percent would be used to finance the interest cost of the government bank recapitalization bonds.

Anshari said that another $5.2 billion would go to installing the debt principals and paying the interest of the government's foreign loans or equivalent to around Rp 43 trillion, based on the current exchange rate of Rp 8,300 per U.S. dollar.

The huge size of the budget expenses for the bank recapitalization program had prompted some legislators to attack the government.

"Why should taxpayers pay for the sins committed by the rich bankers ... We must stop this and spend more for the poor," said one angry legislator.

The government assumes a 4-5 percent economic growth in the 2001 state budget, an inflation rate of 6-8 percent, oil prices of $17-22 per barrel, and an exchange rate of Rp 6,800-7,800 per U.S. dollar.

The international oil price has been hovering around the $28 per barrel mark, compared to the $20 per barrel average assumed in the 2000 state budget.

Prijadi had earlier said that the soaring oil price was expected to cut down the 2000 budget deficit to between 3.5-3.9 percent of gross domestic product (GDP) compared to the initial projection of 4.8 percent of GDP.(rei)