Govt maintains targets despite oil hike
Govt maintains targets despite oil hike
Fitri Wulandari, Jakarta
The government has decided to maintain the macroeconomic
assumptions of the 2005 state budget draft as originally planned
despite the surge in international oil prices.
"Basically, the (macroeconomic) assumptions and fiscal policy
of the 2005 state budget draft remain unchanged from what has
been discussed with the House of Representatives," Coordinating
Minister for the Economy Dorodjatun Kuntjoro-Jakti announced on
Thursday.
He was speaking following a Cabinet meeting on the 2005 draft
budget, which will be unveiled by President Megawati
Soekarnoputri on Aug. 16 during her Independence Day speech.
The House of Representatives budget committee approved in June
the government's macroeconomic targets for next year. The
economic assumptions include a lower budget deficit of 0.8
percent of gross domestic product (compared to 1.2 percent
assumed under the current budget), higher economic growth of 5.4
percent (compared to 4.8 percent forecast for this year), lower
inflation of 5.6 percent and an oil price average of US$24 per
barrel (compared to $22 per barrel).
But soaring international oil prices make these economic
targets appear unrealistic.
The oil price recently surged to a record level of $45 per
barrel due to strong demand and supply disruptions. The price may
not have yet reached its peak, with many doubting the price will
decrease to below $30 per barrel anytime soon.
A prolonged hike in oil price will not only push up inflation
but will also slow down global economic growth, a condition that
would harm the country's exports. The higher economic target for
next year is based on, among other things, an assumption that
exports will grow stronger.
The oil price assumption will also determine the amount of
fuel subsidy the government allocates for next year.
All these developments will eventually also affect other
economic targets set in the budget.
Meanwhile, Minister of Energy and Mineral Resources Purnomo
Yusgiantoro said that crude oil prices may ease next year
supported by improving fundamentals, such improved security in
Iraq which would boost the country's oil output.
The economic assumptions will be used as the basis for
drafting the 2005 state budget, which Dorodjatun said would be a
"baseline budget" to be further deliberated by the next House
members and administration.
The new members of the House resulting from the April election
will be installed in early October, while a new government will
assume office on Oct. 20.
The current administration is drafting the 2005 state budget
considering the fact that both the new House members and
administration will not have sufficient time to draft the budget
from scratch within the two months before the start of the budget
year in January.