Govt asked to revise budget assumptions

Govt asked to revise budget assumptions

Urip Hudiono, The Jakarta Post, Jakarta

All 10 factions at the House of Representatives requested the
government to revise its macroeconomic assumptions, particularly
oil prices, saying they were "unrealistic".

In a plenary session on Tuesday to hear the factions' opinions
on the proposed budget, the House also urged the government to
overhaul its budgetary priorities, reducing allocations for
foreign debt payments and instead putting aside more funds to
improve the country's education, health and infrastructure
sectors.

The Golkar Party faction -- despite the fact that its chairman
is Vice President Jusuf Kalla -- strongly criticized the proposed
budget, with particular emphasis on its assumptions on the price
of oil and rupiah exchange rate.

"We will propose more rational assumptions that reflect the
current situation during the draft budget's deliberation," Golkar
spokeswoman Retna Rosmanita Situmorang said.

In the 2006 state draft budget, the government targets 6.2
percent economic growth and a full-year inflation rate averaging
7 percent, based on an oil price assumption of US$40 a barrel, a
rupiah exchange rate of Rp 9,400 a dollar, a key interest rate of
8 percent and oil production of 1.075 million barrels per day.

Golkar, which controls 129 of the House's 550 seats, also
asked the government to maintain the country's fuel subsidy,
questioning why it had only put aside Rp 68.5 trillion (US$6.85
billion) for the fuel subsidy for next year.

Several senior economic ministers have expressed concern that
this year's fuel subsidy will exceed the Rp 76.5 trillion
allocation and strain the budget, as oil prices continue to soar
over $60 a barrel and the rupiah has slumped at Rp 10,000 to the
dollar.

Kalla even hinted at cutting the fuel subsidy through another
domestic fuel price hike by January at the latest, following
March's fuel price increase.

The Democratic Party faction, which facilitated President
Susilo Bambang Yudhoyono's rise to power, questioned the overly
optimistic 6.2 percent economic growth next year, considering
that this year's 5.9 percent will not likely continue on an
expected global economic slowdown.

Meanwhile, the Indonesian Democratic Party of Struggle (PDI-P)
faction, which controls 109 seats at the House, said the
assumptions used in the proposed budget "were extremely
unrealistic".

"It also reflects the government's incompetence in predicting
the current situation," PDI-P spokesman Djoemad Tjipto Wardoyo
said, adding that the government should have put the rupiah at a
more reasonable rate of between Rp 9,700 and Rp 10,070.

PDI-P also said that the government should put the inflation
target lower than economic growth, so as to not to affect the
public's purchasing power and welfare.

Meanwhile, the National Mandate Party (PAN) faction warned the
government not to deliberately use the unrealistic budget draft
"to put the blame on the House if an unpopular policy needs to be
taken to revise the budget".

Following the fuel price hike in March, the House was involved
in a lengthy debate as to whether to endorse the government's
decision and approve an oil price revision from $24 a barrel to
$35. The oil price was eventually revised to $45.

The Ministry of Finance is expected to deliver the
government's response to the factions' opinion on Aug. 30. The
draft budget will then be deliberated with the House's Budget
Commission, and is expected to be endorsed by September.