Govt readies funds to cover shortfall of 2002 oil revenue
Govt readies funds to cover shortfall of 2002 oil revenue
Berni K. Moestafa, The Jakarta Post, Jakarta
The government will raise funds to anticipate a shortfall in
next year's oil revenues amid concern that a sluggish global
economy may depress crude oil prices to below the level assumed
in the 2002 state budget.
Minister of Finance Boediono said on Monday the contingency
funds would be used if crude oil prices fell below US$22 per
barrel.
"We will then use the contingency funds to cover development
spending in the budget," Boediono told reporters after a meeting
with the House of Representatives budget commission.
He said the setup of the contingency funds had been agreed to
by the House, which would also decide their amount.
"The setup of the contingency funds is only for the 2002 state
budget," he added.
For 2002, the government is eyeing oil export revenues of Rp
44.01 trillion (about $4.19 billion) plus Rp 15.68 trillion in
taxes from the oil and gas sector.
These targets are based on assumptions the rupiah averages the
year at 9,000 against the U.S. dollar, and oil production reaches
1.32 million barrels per day (bpd), with prices of $22 a barrel.
However, the outlook on oil production and oil prices has so
far been against the assumed levels.
With present oil production levels of 1.2 million bpd, state
oil and gas company Pertamina must scramble to raise its output.
Predictions of the global economic downturn lasting well into
next year have also dimmed hopes of an upswing in oil prices.
Oil prices have weakened since the second half of this year,
dragged by a slowing U.S. economy.
The Sept. 11, terrorist attacks in the U.S. tipped world
economies into recession, sending oil prices into a nosedive, to
below $20 a barrel.
In the 2002 state budget draft, the government set an oil
price assumption of $21 a barrel, but upon legislators' urging
raised it to $22.
The setup of the contingency funds might come into conflict
with plans to hedge oil prices at $22.
Hedging the oil price allows the government to protect its oil
revenue base, but it must forgo surpluses if the price moves
above the hedged level.
The plan could also prove costly, as the government must find
a hedging agency willing to cover the high risk of continued
sluggish oil prices.
Boediono said the source of the contingency funds would be the
gap in revenue targets between the 2002 state budget and its
draft.
"During discussions of the (2002) budget draft, the revenue
(targets) in the budget were raised: This is what legislators
will decide on," he explained.
He said the government would derive the higher revenue from
tax and nontax surpluses.
But chairman of the House's budget commission Benny Pasaribu
said the contingency funds should come from savings in routine
spending and delays in development projects.
He urged the government to cut unnecessary routine spending
and delay development projects that were not urgent.
Berni K. Moestafa, The Jakarta Post, Jakarta
The government will raise funds to anticipate a shortfall in
next year's oil revenues amid concern that a sluggish global
economy may depress crude oil prices to below the level assumed
in the 2002 state budget.
Minister of Finance Boediono said on Monday the contingency
funds would be used if crude oil prices fell below US$22 per
barrel.
"We will then use the contingency funds to cover development
spending in the budget," Boediono told reporters after a meeting
with the House of Representatives budget commission.
He said the setup of the contingency funds had been agreed to
by the House, which would also decide their amount.
"The setup of the contingency funds is only for the 2002 state
budget," he added.
For 2002, the government is eyeing oil export revenues of Rp
44.01 trillion (about $4.19 billion) plus Rp 15.68 trillion in
taxes from the oil and gas sector.
These targets are based on assumptions the rupiah averages the
year at 9,000 against the U.S. dollar, and oil production reaches
1.32 million barrels per day (bpd), with prices of $22 a barrel.
However, the outlook on oil production and oil prices has so
far been against the assumed levels.
With present oil production levels of 1.2 million bpd, state
oil and gas company Pertamina must scramble to raise its output.
Predictions of the global economic downturn lasting well into
next year have also dimmed hopes of an upswing in oil prices.
Oil prices have weakened since the second half of this year,
dragged by a slowing U.S. economy.
The Sept. 11, terrorist attacks in the U.S. tipped world
economies into recession, sending oil prices into a nosedive, to
below $20 a barrel.
In the 2002 state budget draft, the government set an oil
price assumption of $21 a barrel, but upon legislators' urging
raised it to $22.
The setup of the contingency funds might come into conflict
with plans to hedge oil prices at $22.
Hedging the oil price allows the government to protect its oil
revenue base, but it must forgo surpluses if the price moves
above the hedged level.
The plan could also prove costly, as the government must find
a hedging agency willing to cover the high risk of continued
sluggish oil prices.
Boediono said the source of the contingency funds would be the
gap in revenue targets between the 2002 state budget and its
draft.
"During discussions of the (2002) budget draft, the revenue
(targets) in the budget were raised: This is what legislators
will decide on," he explained.
He said the government would derive the higher revenue from
tax and nontax surpluses.
But chairman of the House's budget commission Benny Pasaribu
said the contingency funds should come from savings in routine
spending and delays in development projects.
He urged the government to cut unnecessary routine spending
and delay development projects that were not urgent.