Govt expects wider budget deficit

Govt expects wider budget deficit

The government expects the budget deficit to widen this year
from the target of 1.3 percent of gross domestic product, after
saying as recently as last week that the target could be met.

"The government will likely change the deficit target due to
the high oil prices," Darmin Nasution, the Director General for
Financial Institutions at the Finance Ministry, told reporters on
Monday. "It will announce it to the public either tomorrow or the
next day."

Darmin declined to provide further details.

Last week, new Minister of Finance Yusuf Anwar said the target
of 1.3 percent of GDP is achievable.

Currently the average oil price assumption in the state budget
is US$36 a barrel, but oil prices in the global market remain
well supported above $50 per barrel.

Higher-than-expected oil prices will increase the cost of fuel
subsidies from the government's current target of nearly Rp 60
trillion, or 14 percent of its total spending this year.

The new administration under President Susilo Bambang
Yudhoyono has said it won't make the unpopular move of hiking
fuel prices this year, although it might do so in 2005 if oil
prices remain high.

Darmin said the government will finance the bigger budget
deficit this year with sales of assets pledged by former bank
owners, and the government's remaining stakes in some local
banks. -- Dow Jones