Govt, DPR set to start budget debate

JAKARTA (JP): The government planned to meet with the House of Representatives on Thursday (today) to start the deliberation process of the proposed state budget revision, Coordinating Minister for the Economy Rizal Ramli said on Wednesday.

Rizal expected the deliberation process could be completed quickly despite the ongoing political rift between legislators and President Abdurrahman Wahid.

"We plan to submit the budget revision (to the House) on Thursday," he told reporters at his office.

Finance Minister Prijadi Praptosuhardjo had earlier said that the House was expected to give its approval to the revision of 2001 state budget by the end of this month.

The approval is crucial to pave the way for the International Monetary Fund to disburse its next US$400 million loan tranche to the country.

The sharp drop in the exchange rate of the rupiah against the U.S. dollar and the rising domestic interest rate have forced the government to revise the current state budget.

Under the proposed revision, the exchange rate of the rupiah would be set at Rp 9,600 per U.S. dollar (compared to the initial assumption of Rp 7,800 per dollar), inflation at 9.3 percent (compared to 7.2 percent), the interest rate of Bank Indonesia SBI notes at 15 percent (11.5 percent), and gross domestic product at 3.5 percent (5 percent).

The rupiah dropped to below Rp 12,000 per dollar recently amid continuing domestic political uncertainty. The rupiah ended at Rp 11,160 per dollar late on Wednesday. The SBI interest rate is now at 16.16 percent, while year-on-year inflation had reached double digits over the past couple of months.

The drop in the rupiah and the rising interest rate would widen the budget deficit to 6 percent of GDP, compared to the initial projection of 3.7 percent of GDP, unless measures were immediately taken.

The government is proposing a fiscal adjustment package to try to contain the deficit at the initial projection level by cutting down spending and boosting domestic revenue.

Although some legislators have said that they would agree to expedite the deliberation of the budget revision, experts have said that the embattled government might face difficulties from legislators amid the current political fighting between the legislature and Abdurrahman.

The House earlier this week issued a second censure against Abdurrahman over two financial scandals. This may lead to the President's impeachment.

Head of the House State Budget Committee Benny Pasaribu recently told reporters that the government must come up with concrete measures, particularly to stabilize the rupiah, so that the deliberation process could be completed as soon as possible.

The government has said that it would increase the tax and excise revenue target this year by around Rp 3 trillion to help limit the budget deficit.

Director General for Customs and Excise Permana Agung said on Wednesday that the minimum retail cigarette price would be increased by an average of 10 percent starting July to raise the excise tax revenue target this year by around Rp 500 billion.

The government-sanctioned minimum retail price was last increased in April.

The government also plans to raise the target for proceeds from privatization this year by around Rp 2.2 trillion to reach approximately Rp 8.7 trillion, and to raise around Rp 5.2 trillion from resource-rich provinces and districts by issuing bonds, selling shares in state enterprises, and selling assets held by the Indonesian Bank Restructuring Agency.

As regarding spending, the government plans to further cut subsidies, and streamline development spending.

Rizal called on government officials to help the state budget by cutting down on non-urgent spending including funds allocated for foreign consultants in various government projects. (rei)