Govt rejects 100% hike in salaries
JAKARTA (JP): Minister of Finance Bambang Sudibyo said on Monday it was impossible for the government to fulfill the demand from the House of Representatives to raise the salaries of government employees by 100 percent this year.
Bambang said raising the salaries of government employees by 100 percent would translate into an additional funding necessity of about Rp 27 trillion (US$3.57 billion) in the new 2000 state budget, and would affect the government's routine expenditure, particularly the spending on rehabilitating the country's ailing banking sector.
"Looking at the current capacity of the state finances, the increase (proposal) is difficult to realize," he told the House during a plenary session on the April-December 2000 state budget draft.
The government initially proposed a 20 percent increase in salaries.
The National Awakening Party (PKB) faction led the call for the 100 percent increase in the salaries of government employees on grounds that the current salaries were too low, and a 20 percent increase was small compared to the massive government spending on the restructuring and the recapitalization of ailing banks.
The faction also reasoned that a significant rise in the salaries would help to fight corruption and create a clean and effective bureaucratic system.
The faction also said the government should trim down its budget allocation for the bank restructuring and recapitalization program.
But Bambang said although the salaries of government employees were not high, but they were still higher than the country's minimum regional wage.
He added that raising the salaries was only one way to clean up corruption in the state bureaucracy.
Elsewhere, Bambang said the government would try hard not to revise its budget assumptions despite concerns over domestic social and political development.
He said that revision in the budget assumptions would also affect other elements of the budget, including the revenue and spending sides.
"We have consulted on the budget assumptions with Bank Indonesia," he said.
"We will try not to revise the budget assumptions," he said.
He particularly pointed out that the exchange rate assumption of Rp 7,000 per U.S. dollar in the state budget was made based on various factors including the expected domestic inflation level and inflation in the country's trading partners.
He said at Rp 7,000 per dollar, Indonesia's export products were still competitive in the international market.
"But we also realize the exchange rate is also affected by noneconomic factors," he added.
He said the government would make strong efforts to stabilize the domestic political situation and maintain security conditions as well as expedite the bank recapitalization and corporate restructuring process in order to achieve the budget targets.
The state budget assumes an exchange rate of Rp 7,000 per dollar, an economic growth of 3.8 percent, inflation rate of 3.8 percent and an oil price of US$18 per barrel.
But several House factions, particularly the Indonesian Democratic Party of Struggle (PDI Perjuangan), the largest political party, warned the government that the assumptions were too optimistic amid separatist movements and sectarian clashes in several parts of the country as well as the standoff between President Abdurrahman Wahid and former Indonesian Military (TNI) commander Gen. Wiranto, who is now the coordinating minister for political affairs and security.
The political infighting between Abdurrahman and Wiranto, and rumors of a planned coup by the military has put pressure on the rupiah, which hovered at about Rp 7,600 per dollar last week. (rei)