Govt, DPR set to start budget debate

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)