Government forecasts Rp 53t deficit in 2001 budget

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)