Govt not thinking of spending cuts

Berni K. Moestafa and Tantri Yuliandini, The Jakarta Post, Jakarta

Defying signs of a revenue shortfall in this year's state budget, the government denied it had begun planning spending cuts in the budget, arguing that other options existed to avoid this move.

Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti said on Tuesday he felt the government might still meet the budget targets for this year.

"So far, that (spending cuts) is something the government hasn't thought of at all," Dorodjatun told reporters after attending a seminar on Indonesia's economic outlook following the Sept. 11 terrorist strikes. The seminar was organized by the Faculty of Economics of the University of Indonesia.

Skepticism is running high about the sustainability of this year's state budget, with the government unable to fully tap its revenue sources.

This is compounded by surging expenditure, as a weaker rupiah has driven up the cost of debt servicing to levels beyond what the budget had assumed.

With tax and nontax revenues progressing in line with budget targets, the only option left to balance higher expenditure is to boost deficit financing.

But here the government is short in both domestic and external financing sources to at least cover the deficit, even without taking into account the surge in expenditure.

Making up the bulk of the domestic financing sources are proceeds from the privatization and asset sales programs.

Yet with two months to the end of the fiscal year, the proceeds from privatization still stand at nil.

Asset sales targets are in doubt as well, due to adverse market sentiment clouding the outlook of future sales.

Elsewhere, external financing is short by US$900 million, a sum that lenders have withheld, as conditions for the loans have not been met.

"From the work we've done with (Finance Minister) Boediono and (State Minister for State Enterprises) Laksamana (Sukardi), I think conditions so far are still under control," Dorodjatun remarked.

Commenting on the slow progress of privatization, he said the government had a variety of state firms it could choose to sell.

Earlier, Laksamana said he was upbeat about the sale of telecommunications firm PT Telkom Indonesia and Bank Niaga this year.

However, this optimism appears to lack the support of the Indonesian Bank Restructuring Agency (IBRA), which is in charge of selling Bank Niaga.

IBRA deputy chairwoman for bank restructuring Felia Salim said on Tuesday that the agency had no plans to complete the sale of Bank Niaga this year.

"The divestment isn't for this year. Bank Niaga's divestment strategy is under preparation," Felia told reporters.

She said the agency was instead focusing on selling Bank Central Asia (BCA) this year, one of IBRA's most precious assets.

Other state firms in the pipeline include cement firm PT Semen Gresik, oil palm plantation firm PT Socfindo, and hotel operator PT Wisma Nusantara.

Officials estimated the sale of Bank Niaga, BCA, Semen Gresik and PT Telkom could roughly total Rp 16.7 trillion (about $1.5 billion). This compares to a current shortfall of some Rp 13.5 trillion in both privatization and asset sales proceeds.

[Assets ready for sale, estimated value (Rp trillion):] PT Semen Gresik, 5.2; PT Bank Central Asia, 5.0; PT Socfindo, 0.4; PT Telkom Indonesia, n/a; PT Wisma Nusantara, n/a