Govt records low deficit in first half

The Jakarta Post, Jakarta

The government has said it posted a budget deficit of Rp 2.5 trillion (US$304.87 million) in the first half of the year, well below the full-year deficit target of Rp 34.4 trillion, thanks primarily to improving macroeconomic indicators.

The deficit in the first six months of the year accounted for about 7.3 percent of the Rp 34.4 trillion target, said a media release on Thursday from the Ministry of Finance. The Rp 34.4 trillion deficit was equal to around 1.8 percent of the country's gross domestic product (GDP).

A stronger exchange rate of the rupiah against the U.S. dollar and declining Bank Indonesia benchmark interest rate have helped cut spending, particularly on foreign and domestic debt repayments.

The release said that the rupiah had strengthened to an average rate of Rp 8,693 per U.S. dollar during the first semester, less than the state budget assumption of Rp 9,000 per dollar.

Inflation has also eased, mainly because of the stronger rupiah, which made imported goods cheaper. In the January through June period, the cumulative inflation level was 1.23 percent, way below a full-year forecast of 9 percent.

Solid development in the rupiah and weak inflation have allowed the central bank to retain its aggressive stance in cutting its benchmark interest rate.

During the first six months of the year, the interest rate has averaged 11.65 percent, around 1.35 percentage points short of the state budget target.

These factors have helped keep the government's expenditure manageable, with around Rp 139.7 trillion spent from January through June, 37.7 percent of the total allocation for the whole year.

On the revenue side, the budget gained Rp 137.2 trillion as of June, or around 40 percent of the total 2003 revenue target.

Target & Realization of 2003 Budget ----------------------------------------------------------

Full-year GDP H1

Target

(Rp) (%) (realization) ---------------------------------------------------------- * State revenue: 336.6 t 17.3 137.2 t * State expenditure: 370.6 t 19.0 139.7 t

- Routine : 188.9 t 9.7 71.0 t

- Development: 65.1 t 3.4 14.2 t

- Regional: 116.9 t 5.9 54.5 t * Budget deficit: 34.4 t 1.8 2.5 t * Domestic finance: 22.5 t 1.2 1.6 t * Foreign finance: 12.0 t 0.6 0.8 t ---------------------------------------------------------- Source: Ministry of Finance