Govt sees 2005 deficit widen to 1% of GDP
Urip Hudiono, The Jakarta Post, Jakarta
The government is considering revising upward next year's state budget deficit to 1 percent of gross domestic product (GDP) from a previous projection of 0.8 percent, the finance minister said.
Speaking on Monday during the ministry's first meeting with House of Representatives Commission XI for financial affairs, Minister of Finance Yusuf Anwar said that such a revision was necessary to anticipate next year's rising costs for the fuel subsidy, as well as expenditure for infrastructure projects that the government has planned to help stimulate economic growth.
"A deficit target of 0.8 percent (of the GDP), based on oil prices at US$24 (per barrel), would be hard to achieve," he said. "It would be more manageable if it was set at 1 percent."
And with still high global oil prices feeding fuel subsidies, Yusuf explained that it would therefore be impossible for the government not to hike fuel prices next year to meet even that high level of deficit.
"The sooner we adjust fuel prices, the better it will be for our fiscal condition," he said. "It would have no effect on the deficit if it were done near the end of the (budget) year."
Yusuf, however, said that the planned fuel price hike and budget revision would be done in consultation with the House, and that it would still conform with the country's goal of eventually reaching a zero budget deficit by 2006.
Meanwhile, concerning the 2004 budget deficit target, Yusuf affirmed previous estimates that it would widen to around 1.4- 1.5 percent of GDP compared to the initial target of 1.3 percent of GDP.
"With revenue at Rp 316.1 trillion ($35.1 billion) and expenditure at Rp 341.1 trillion, the deficit has therefore reached Rp 25.0 trillion, or 95.1 percent of its limit," he said.
Meanwhile, legislators expressed concern over this year's widening deficit, and the government's efforts in plugging it.
Achmad Hafiz Zawawi of the Golkar Party asked the minister not to downplay the effect of the rising deficit, as even a rise of 0.2 percent -- amounting to some Rp 860 billion -- could be instead used to ease unemployment in the country.
"Assuming a minimum wage of Rp 700,000 per month, such an amount could create thousands of jobs per year," he said.
Rama Pratama of the Justice Prosperity Party, meanwhile, questioned why the government always related the deficit with the fuel subsidy, when it was actually foreign debts that mostly placed a strain on the budget.
"The government has to allocate a lot of money in the budget for debt installments and their interest," he said. "New debts, meanwhile, are actually used just for servicing old debts."
On a similar note, Dradjat Wibowo of the National Mandate Party questioned a commitment from the Asian Development Bank and the World Bank to disburse a $725 million loan to the government by December upon conforming to certain requests from them.
"Although it could help plug the deficit, the government has to openly explain to the public whether the requests include the privatization of valuable state-owned enterprises, for such a small loan," he said.