Govt, IMF to discuss 2003 state budget
The Jakarta Post, Jakarta
Talks on the draft of the 2003 state budget will be high on the agenda for discussion between the government and visiting International Monetary Fund (IMF) review team, Minister of Finance Boediono said on Wednesday.
"The IMF will definitely give inputs for the 2003 state budget bill during their visit here, although the final decision on that will be totally up to the government," Boediono was quoted as saying by detik.com on Wednesday.
The IMF team arrived in Jakarta late on Tuesday to review the country's progress in implementing economic reform programs, as outlined in the letter of intent (LoI) signed in May. They are expected to stay here for more than a week.
The LoI contains a set of economic targets that has to be met by the government in return for the disbursement of IMF money. Indonesia is tied to a three-year US$5 billion loan program with the IMF. So far the country has borrowed some $2.6 billion. The next loan tranche is expected to be worth around $350 million.
Boediono did not provide details, but analysts have said that the budget talks would mainly focus on macroeconomic indicator targets for next year and the budget deficit target.
For next year, the government has said it is aiming to slash the state budget deficit to 1 percent of gross domestic product (GDP) from the estimated 2.5 percent for this year.
A lower deficit is crucial, the government has said, to create stable macroeconomic conditions, which would pave the way for luring investment, badly needed to push economic growth.
As a consequence, however, further reductions in subsidies and pumping up tax revenue to help offset huge budget spending -- particularly on debt repayment -- would be inevitable.
Such an unpopular policy would probably draw strong opposition from legislators as it would create more difficulties for the common people who are already suffering from years of economic crisis.
Cutting fuel subsidies, for instance, would inevitably raise fuel prices, which would affect every strata of society.
Other targets for next year would be an economic growth rate of between 4 percent and 6 percent, compared to the 4 percent projected for this year.
Inflation is targeted at between 7 percent and 9 percent, the rupiah exchange rate at between Rp 8,500 and Rp 9,500 per U.S. dollar, the interest rate on Bank Indonesia three-month SBI promissory notes at 12.5 percent to 14.5 percent and the price of oil at between $19 and $20 per barrel.
Boediono has said that the relatively optimistic economic targets for next year were based on better political conditions at home, coupled with a projected rapid recovery in the global economy.