Govt, IMF to mull spending cuts on 2001 budget

Berni K. Moestafa, The Jakarta Post, Jakarta

The government and the International Monetary Fund (IMF) are expected to start discussions next week on the slashing of expenditure in this year's state budget to anticipate a shortfall in deficit financing from the privatization and asset sales programs.

IMF Senior Representative for Indonesia David C. Nellor did not rule out on Wednesday the possibility of the government falling behind its revenue targets.

"If that's the case, then there will have to be a general discussion on the budget. Inevitably, there has to be either some additional income from other sources, or some adjustments to revenue and expenditure," he said.

Nellor said the IMF and the government would look into this matter during discussions next week.

An IMF team is in Jakarta to review the government's progress in meeting its budget targets this year.

The team will also hold preliminary talks on the fourth Letter of Intent (LoI), necessary for disbursement of the fund's loans.

A shortage in privatization and asset sales proceeds, coupled with foreign loans that may not be disbursed this year, could force the government to adjust its budget.

"The question is where the adjustment can take place that will be least costly," Nellor said.

Earlier, analysts said spending cuts were likely to be aimed at development expenditure. This, they said, was to ensure that routine expenditure covering civil servants salaries would remain intact.

Nellor said that, as the end of the fiscal year was approaching, the government's options for adjustments were limited.

"At the end of the year, the budget numbers will be added up and the adjustments will have to take place somewhere. If there is less financing, you can afford to spend less," he explained.

Concerns have risen that the government may fall far behind this year's privatization and asset sales targets.

A deal for the sale of cement company PT Semen Gresik to a Mexican firm is on the brink of collapsing, putting at risk proceeds equal to more than 80 percent of this year's privatization target.

With zero proceeds collected from the Rp 6.5 trillion (about US$619 million) targeted through privatization, the government can ill afford to lose that deal.

The Indonesian Bank Restructuring Agency (IBRA), in charge of asset sales, is also scrambling to sell one of its most prized assets, PT Bank Central Asia (BCA).

Investors' response to BCA has been lukewarm, underlining the lack of appetite foreign investors have for Indonesian assets.

On Wednesday, Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti said selling the 51 percent of BCA was unlikely to happen this year.

Under the budget, IBRA must contribute Rp 27 trillion. In September it was still short Rp 8 trillion.

State Minister of State Enterprises Laksamana Sukardi signaled that the government would push ahead with the sale of PT Bank Niaga and PT Telkom Indonesia this year.

"At least we'll have income from the two companies this year," he said in response to questions about funding sources besides Semen Gresik and BCA.