Govt, House agree on 2001 state budget

JAKARTA (JP): The government and the House of Representatives state budget committee reached a final agreement Saturday on the size of the 2001 state budget, with some revisions.

The new assumptions of the upcoming state budget are as follows: the exchange rate of the rupiah is Rp 7,800 per U,S.. dollar, international oil price is $24 per barrel, inflation rate 7.2 percent, economic growth 5 percent, and the interest rate of three-month Bank Indonesia SBI promissory notes 11.5 percent.

The House is scheduled to approve the state budget on Tuesday at a plenary session.

The original assumptions in the draft state budget, delivered to the legislature early in October were as follows: Rp 7,300 to the U.S.. dollar, international oil price $22 per barrel, inflation rate 7 percent, economic growth 4.5 percent, and SBI interest rate 11 percent.

Deputy of the House budget committee Abdullah Zainie said at the final budget meeting with Finance Minister Prijadi Praptosuhardjo that the assumptions were revised to better reflect economic reality.

The rupiah has depreciated by about 25 percent from its level in January to about Rp 9,500 per U,S.. dollar due to a combination of domestic political instability and external factors.

The international oil price has been hovering at $33 per barrel.

Abdullah said that the change in the assumptions had also inflated the state budget to Rp 315.76 trillion (US$40.48 billion) compared to the Rp 295.11 trillion set in the draft state budget.

He said that domestic revenue was revised to Rp 263.23 trillion, up from Rp 242.99 trillion.

He said that the state budget deficit was still at 3.7 percent of gross domestic product (GDP), although in absolute terms it rose to Rp 52.53 trillion from Rp 52.17 trillion due to the slight change in the estimated size of the 2001 GDP.

The deficit will be financed by proceeds from the sale of assets under the Indonesian Bank Restructuring Agency (IBRA), the government's privatization program and foreign loans.

Abdullah said that the privatization target had been revised to Rp 6.5 trillion, up from the Rp 5 trillion stated in the government proposed state budget.

The government initially planned to raise Rp 6.5 trillion for the current 2000 state budget from the privatization program, but not a single cent has been raised to date. The government said that the privatization program for this year had to be dropped due to an unfavorable market condition amid the unstable political and economic conditions.

Abdullah said the target for IBRA was unchanged at Rp 27 trillion.

The agency controls Rp 600 trillion worth of various banking assets, including about Rp 260 trillion worth of bank nonperforming loans (NPLs) it received from ailing banks. IBRA has been charged with restructuring the NPLs to become performing, and to dispose of the various fixed assets to raise cash to help finance the state budget, which is heavily burdened by the huge cost of the country's bank restructuring and recapitalization program.

But Abdullah said that about Rp 10 trillion of outstanding government bank recapitalization bonds would be pulled from the market in 2001 and exchanged with the performing loans under IBRA.

The government has issued about Rp 650 trillion worth of bonds to finance the bank restructuring and recapitalization program.

Reducing the amount of the outstanding bonds will help lower the burden of the state budget, which must cover the interest cost of the bonds.

Abdullah said the interest cost of the bonds next year would decrease to Rp 53.46 trillion from Rp 55.79 trillion set in the proposed budget.

The agreement by the central bank to cover about Rp 24.5 trillion of the bonds and the plan to withdraw from the market Rp 10 trillion in the bonds have allowed for the cut in the interest rate cost.

The government has issued about Rp 144.5 trillion worth of bonds (as part of the Rp 650 trillion bonds) to finance the emergency liquidity support injected via Bank Indonesia to ailing domestic banks between 1997 and early 1999.

But the Supreme Audit Agency (BPK) has revealed that about Rp 80 trillion of the liquidity support had been misused partly due to the weak supervision of the central bank.

After nearly two years of debate with the government, the central bank finally agreed recently to cover the cost of part of the bonds.

Meanwhile, some legislators said on Saturday that the agreement reached by the government and the central bank had not been approved by the legislature.

They said that the figure of the state budget burden for the government bonds next year was not final until the House approved the plans to allow Bank Indonesia to only cover Rp 24.5 trillion of the emergency liquidity support.

Some legislators have insisted that the central bank should cover the whole cost of the emergency liquidity support facility.

Elsewhere, Abdullah said that the fuel subsidy in the January- December 2001 state budget would amount to Rp 41.03 trillion, compared to Rp 22.46 trillion allocated in the April-December 2000 state budget.

The government plans to raise fuel prices by an average of 20 percent next April. Fuel prices were last raised by 12 percent in April but was effected only in October. (rei)