Govt bows to pressure, revises assumptions
Govt bows to pressure, revises assumptions
The Jakarta Post, Jakarta
In response to a chorus of criticism over the assumptions in its
2006 draft budget, the government has proposed revisions to most
of its basic assumptions, including the much-cited oil price
forecast.
During a hearing with lawmakers on Monday, Minister of Finance
Jusuf Anwar proposed that the Indonesian Crude Price (ICP) in the
budget be revised to between US$50 and $55 per barrel, from an
initial assumption of $40 per barrel.
With global oil prices showing no signs of abating, the
proposal is seen as a response to earlier rebukes over the
government's overly cautious approach in determining key aspects
of the budget.
"Because of the less conducive development of the
macroeconomics condition lately, especially the spike in oil
prices and the U.S. dollar, the government is proposing new
assumptions for the 2006 budget," Jusuf was quoted as saying by
Dow Jones.
On Monday, New York's main oil contract, light sweet crude for
delivery in October, climbed US$1.20 to $64.20 per barrel in
electronic trading. In London, the price of Brent North Sea crude
for November delivery rose $1.16 to $62.97 per barrel.
Other proposed revisions include the rupiah's exchange rate
against the dollar.
The rupiah will likely average between 9,500 and 10,000
against the greenback next year, Jusuf told House of
Representatives' Commission XI for financial affairs.
The government originally set the exchange rate at Rp 9,400
per U.S. dollar.
It also projected a slightly more cautious gross domestic
product growth target of 6 percent to 6.2 percent in 2006, from
the earlier assumption of 6.2 percent.
The inflation projection for next year was revised upward to
between 7 percent and 8 percent from 7 percent, while the oil
output target was maintained at 1.075 million barrels a day.
The government's 2006 budget assumptions, submitted to the
House in mid-August, immediately met with a whirlwind of
criticism from analysts and legislators.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said at the time that the ICP would stand at between $40 and $45
per barrel, with international oil prices expected to decline by
up to $15 a barrel in 2006 due to a slowdown in the global
economy and an easing of fears of political unrest in oil-
producing countries.
The ICP reflects the prices of various types of oil produced
in Indonesia and is used to determine local administrations'
share of oil revenue.
To meet domestic fuel demand, Indonesia has to import some
400,000 barrels of crude and 300,000 barrels of refined fuel
products per day. These imports use global market prices as their
benchmarks.
Continuing pressure from global oil prices and concerns that
the budget cannot afford the ballooning fuel subsidy sent the
rupiah to a low of Rp 11,800 against the dollar last month.
After the central bank raised its benchmark rate to 10 percent
from 8.75 percent, the rupiah has rebounded to about 10,000 per
dollar.
The House and government will continue the deliberation of the
2006 state budget over the coming months.