Government to keep oil price at $16.5 a barrel

Government to keep oil price at $16.5 a barrel

JAKARTA (JP): The government is likely to maintain the
estimated average oil price of US$16.5 per barrel during the
1995-1996 fiscal year as the basis for estimating oil and gas tax
receipts for the coming year.

"It is very difficult to predict international oil price
developments. Although the oil prices strengthened during the
first semester, there is a tendency that the prices will
decrease," said Minister of Finance Mar'ie Muhammad in a hearing
with the budgetary commission of the House of Representatives.

The four-day hearing, which started on Monday, will be
discussing the first semester implementation of the current state
budget and projections and assumptions for planning the 1996-1997
budget.

The minister said the state-owned oil company Pertamina has
suggested that the government set the oil price at a conservative
level of between $16 and $16.50 per barrel.

During the current fiscal year, the oil revenues are expected
to be slightly higher than planned because the actual average oil
price during the first semester of this fiscal year -- beginning
in April -- was $17.16 per barrel.

In the Sixth Five Year Development Plan, government revenues
from oil and gas are estimated at Rp 14.29 trillion for fiscal
1996-1997, of which Rp 10.42 trillion is expected from oil and Rp
3.87 trillion from gas.

He said that in estimating the oil production, the government
will always consider the production capacity of Pertamina and its
contractors, as well as the production quota set by the
Organization of Petroleum Exporting Countries (OPEC), of which
Indonesia is a member.

"The actual oil and gas condensate production in the first
semester reached 1.61 million barrels a day, higher than the
estimate of 1.53 million barrels, so we'll continue to be careful
in projecting oil production for the next fiscal year," he said.

Oil and condensate production was estimated at 1.52 million
barrels per day for the current fiscal year, but the actual
production could be smaller due to a downward tendency shown
during the first semester of this year, he added.

Deficit

In replying to questions about efforts to curb the current
account deficit, which has tended to increase sharply this year,
Mar'ie said the government plans to step up export promotion and
curb the growth of imports, particularly of consumer goods.

He acknowledged that imports grew by 30.69 percent during the
January-June period, much higher than the export growth of only
14.12 percent.

Mar'ie said the bulk of imports consisted of capital goods and
basic and intermediate materials for domestic industries which
could not be cut down.

But he acknowledged that the imports of consumer goods
increased by more than 100 percent in the first semester due
largely to the sharp rise in rice and sugar imports.

He added that the government will also provide incentives for
investors with a view to increasing exports. One of the
incentives will be allowing local companies to use chartered
foreign ships to carry exports.

Mar'ie said the government also would step up anti-inflation
efforts to curb the general price increases.

During the first seven months (April-October) of fiscal 1995-
1996 the inflation rate reached 4.39 percent, lower than the 4.56
percent in the same period of last fiscal year.

Mar'ie estimated that inflation during 1995-1996 would not
likely exceed the 8.57 percent posted last fiscal year and
projected a lower inflation rate for next year. (13)