Wed, 23 Feb 2000

Government raises its target on revenue

JAKARTA (JP): The government decided on Tuesday to revise upward its targets for asset sales, oil export price, and tax revenues in the April-December 2000 budget year following pressure from the House of Representatives.

The chairman of House Commission IX on state budget and banking, Sukowalujo Mintohardjo, said that the government agreed to raise the target of privatization proceeds to Rp 6.5 trillion (US$928.57 million) from Rp 5.9 trillion proposed in the draft state budget.

Speaking to reporters after a closed door meeting with Finance Minister Bambang Sudibyo, he said that the Indonesian Bank Restructuring Agency (IBRA) was now expected to raise around Rp 18.9 trillion, compared to the earlier target of Rp 16.25 trillion.

Sukowalujo also said that the oil price assumption in the next budget would be US$20 per barrel compared to $18 per barrel in the earlier proposal. This is expected to allow the government to moderate its planed increase in fuel prices.

"The projected budget deficit will now decline to Rp 44.1 trillion from an earlier estimate of more than Rp 45 trillion," he said.

Bambang said that the increase in the tax revenue target was needed to finance routine government expenditures, particularly the planned salary increase for government employees.

The finance minister added that the higher privatization proceeds and increased IBRA asset sales revenues would help finance the budget deficit.

The government has been under strong pressure to revise upward its revenue targets.

House Commission IX had earlier demanded the government double the IBRA asset sales target.

"We don't want to send the wrong signal to the market that we're going to adopt a fire sale strategy. This will only put pressure on the price of the IBRA assets," he said.

IBRA holds more than Rp 600 trillion worth of equities and bad loans taken over from banks.

The House also pushed the government to raise its dividend revenues from state companies to Rp 8 trillion compared to the Rp 4 trillion target stated in the 2000 draft budget.

"They (the Ministry of Investment and State Enterprises) don't dare. But they agree to raise the privatization proceeds," Bambang said, pointing out that it's difficult to raise the profit of state enterprises as many of them have been facing financial difficulties.

The government earlier said that it planned to divest between 20 percent and 40 percent in eight state enterprises in the upcoming budget year.

Bambang didn't say whether more companies had to be privatized to accommodate the increase in the privatization target.

The House also demanded the government raise the country's tax ratio from around 10 percent of gross domestic products (GDP) to more than 14 percent.

But Director General of Taxation Mahfud Sidik said that such a large increase in one budget year would equate to approximately 60 percent increase in tax revenues, which is impossible in the current economic situation.

He said that based on a 3.8 percent GDP growth and inflation assumption of 4.8 percent in the 2000 budget year, and considering the current economic situation, the "most feasible" tax increase was between 9 percent and 13 percent.

The government forecast tax revenues of Rp 97.8 trillion in the draft budget.

Bambang said that the increase in tax revenues would help the government increase "significantly" the salary of government employees.

Meanwhile, Minister of Mines and Energy Susilo Bambang Yudhoyono said earlier that the government might revise downward the planned increase in fuel prices to 10 percent or less, provided that the House of Representatives and the government agreed to increase the oil price reference in the state budget to $20 per barrel from $18 per barrel.

He said in a seminar on electricity that if the oil price reference in the state budget was increased to $20 per barrel, the government could provide larger allocations for fuel subsidies.

The government initially proposed an average 20 percent hike in fuel prices starting April 1, but thus far the House has insisted the increase should not be higher than 10 percent.

In a related development, the ministry's director general of oil and gas, Rachmat Sudibyo, said the budget would get Rp 6.5 trillion in additional revenues if the average oil export price assumed for the 2000 budget increased from $18 to $20 per barrel.

"Since higher crude oil prices will also increase fuel subsidies, net additional revenues from the $2 price rise will amount to Rp 2.6 trillion," Rachmat said on the sidelines of a meeting with the House's special team for electricity tariff and fuel price. (rei/jsk)