Government posts small first-half budget deficit

The Jakarta Post, Jakarta

The government said on Tuesday that the budget deficit in the first half of the year reached Rp 6.4 trillion, or equal to 0.3 percent of the gross domestic product (GDP), bolstering confidence that it was well on track to meet its full-year deficit target of 1.8 percent of the GDP.

Anggito Abimanyu, head of the fiscal analysis department at the finance ministry, said the relatively low deficit was attributed to low government spending during the period.

While analysts have said that spending in the first six-month period was traditionally slow and would pick up in the second half, Anggito was optimistic that the full-year deficit target would be achieved.

Minister of Finance Boediono has been determined to bring down the government budget deficit to a safe level in order to restore confidence in the economy.

Next year, the government is targeting a lower deficit of 1 percent of the GDP, and a lower tax-to-GDP ratio of 60 percent from the current 67 percent level.

A lower deficit would also mean less need for foreign financing, which has been one of the main sources of financing for the deficit. The other sources are the proceeds from the sales of assets under the Indonesian Bank Restructuring Agency (IBRA) and the privatization of state-owned companies.

For this year, the government has secured Rp 29.25 trillion in foreign borrowings, all coming from the country's traditional international lenders under the Consultative Group on Indonesia (CGI).

In the meantime, the government is expected to propose a draft revision of the 2003 state budget sometime in August to the House of Representatives, with the draft to be finalized toward the end of this month.

The government said it had identified a number of issues to be taken into account in the draft revision.

The finance ministry's Director General for State Budget Anshari Ritonga said these issues concerned "Aceh-related problems, foreign and domestic debt payments and the fuel subsidy".

While Anshari refused to mention detailed figures as they were still being calculated, he said that the revision was needed to cope with the latest internal and external developments.

"For instance, in regards (the war in) Aceh, the current budget had never allocated funds for such spending," he said.

The government has taken Rp 1.7 trillion from the 2003 budget, under its Rp 8.1 trillion reserve account for emergency financing, to finance the military operation in Aceh.

As for payments of foreign debts, both principal and interest, there would also be some revisions following the 8 percent appreciation in the exchange rate of the rupiah against the U.S. dollar. The current allocation for the posts, assuming a rate of Rp 9,000 per dollar, amounts to Rp 44 trillion.