Govt, IMF to mull spending cuts on 2001 budget
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.