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