Government scales down 1999/2000 budget deficit estimate

JAKARTA (JP): Finance minister Bambang Sudibyo revised downward the 1999/2000 budget deficit to 3.75 percent of gross domestic product (GDP) from an earlier estimate of 4.8 percent.

Speaking at a working session with the House's budget committee on Monday, Bambang said the lower estimated deficit was due to higher oil prices and the rescheduling of the government's overseas debts.

The initial estimate for the fiscal year ending March 2000 was 6.8 percent of GDP, but Bambang recently revised it to 4.8 percent.

The government initially projected it would receive Rp 20.96 trillion (about US$3 billion) in oil and gas revenue this fiscal year, based on the crude oil price assumption of $10.50 per barrel.

Oil prices started to move upward beginning in the middle of last year, reaching $16 per barrel and hovering around $25 per barrel recently.

In the first semester alone, the government received some Rp 21.69 trillion in oil and gas revenue.

"The average crude oil price in the second semester is expected to be $20 per barrel," Bambang said.

He said the country's overseas debts reached $144.95 billion as of June 30, 1999, consisting of $70.69 billion in government overseas debts, and $74.26 billion owed by the private sector and state companies.

Bambang said the government was expected to be able to reschedule some $1.6 billion in foreign loans maturing this fiscal year to reduce debt servicing.

He said the government spent some Rp 19.6 trillion in the first semester for the installment of the principal and interest of its foreign debts, and the figure is estimated to reach Rp 22 trillion in the second semester.

Bambang also said that total expenditures for this fiscal year were expected to fall to Rp 216.04 trillion from the earlier projection of Rp 293.6 trillion.

The current state budget is heavily burdened by spending on the country's bank restructuring program and huge subsidies on fuel, electricity, foods and education.

The state budget is expected to provide Rp 17 trillion to help finance the bank restructuring program in the fiscal year.

The budget is also allocating Rp 6.8 trillion for food subsidies and Rp 7.1 trillion for electricity subsidies.

Spending for the fuel subsidy totaled Rp 11.37 trillion in the first six months of the fiscal year, and Bambang said that another Rp 20 trillion would have to be provided in the second semester based on the assumption that the average oil price would be $20 per barrel.

Bambang said the government was determined to gradually lower the subsidies to ease the burden on the state budget.

He said the government was planning to propose a law on subsidies in a bid to determine if a given subsidy benefited the intended target.

The subsidy policy is based on a presidential decree.

Bambang said the benefits of the current government subsidy were also enjoyed by the affluent.

"Many members of the intended target do not benefit from the government subsidy policy," he said.

The government, the World Bank and the International Monetary Fund are expected to meet soon to design steps on how to gradually lower the subsidy.

Subsidies are a sensitive political issue in Indonesia. A drastic reduction in subsidies could heavily detract from the government's popularity.

A major cut in the fuel subsidy by then president Soeharto last year was among the contributors to his loss of power. (rei)