Govt slashes State Budget to Rp 263.88 trillion

Govt slashes State Budget to Rp 263.88 trillion

JAKARTA (JP): The government pared down yesterday its 1998/99
State Budget to Rp 263.88 trillion (US$18.8 billion) from Rp
277.14 trillion announced last week by reducing appropriations
for debt repayments.

The cut, prompted by a demand from the House of
Representatives for a smaller budget, was made possible partly by
the willingness of most sovereign creditors to reschedule the
repayment of government debts due this year, legislator Paskah
Suzetta said.

"This is the first time in 32 years that the government has
listened to the people's aspirations," Paskah told reporters on
the sidelines of the second day of budget deliberations between
Minister of Finance Bambang Subianto and House Commission VIII
for finance and the state budget.

The second amendment to the budget, currently in its fourth
month of implementation, is expected to receive final approval
from the House at a plenary session scheduled tomorrow.

Bambang said Monday that most of the government's creditors
had agreed to reschedule Indonesia's official debt due for this
fiscal year to help the country finance the huge subsidies needed
to aid the poor in surviving the economic crisis.

Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita also confirmed Monday that about $1.25
billion in the country's sovereign debt due this year could be
rescheduled.

"We wanted all principal payments to be postponed during the
current fiscal year, but the minister of finance told us that it
was the maximum what we could get," Paskah said.

The government has also agreed to calls from the House to
reduce foreign aid financing in the 1998/99 budget, he said,
pointing to a cut in foreign loan receipts to Rp 114.58 trillion
from Rp 127.83 trillion in the amendment proposed to the House
last week.

Revenues from program aid were lowered to Rp 74.04 trillion
from Rp 87.29 trillion, but those from project aid remained
unchanged at Rp 40.54 trillion in the revised figures released
yesterday.

The rupiah financing for foreign-funded development projects
was increased to Rp 52.14 trillion from Rp 31.06 trillion.

For expenditures, principal payment on the government's
overseas debt was reduced to Rp 33.26 trillion from Rp 46.51
trillion, but interest charge payments were constant at Rp 31.03
trillion.

"We have to keep paying the interest rate to maintain
international confidence in our country," Paskah said.

Payment of the government's debt to Bank Indonesia was also
slashed to Rp 1.94 trillion from Rp 16.94 trillion.

The debts were incurred after the government borrowed from the
central bank to reimburse the depositors of 16 banks closed in
November and seven other banks suspended and taken over by the
Indonesian Bank Restructuring Agency (IBRA).

"The government initially planned to repay its debt to the
central bank within 30 years, but this maturity has been
prolonged," Paskah said.

The government did not revise assumptions used in the budget.
These included the rupiah exchange rate of Rp 10,600 to the U.S.
dollar; average oil price of $13 per barrel; economic growth of
negative 12 percent and inflation of 66 percent.

The government unveiled last Thursday the second budget
amendment which proposed total spending of Rp 277.14 trillion, up
markedly from Rp 147.22 trillion approved by the House in late
February.

The expansion reflected a further deterioration in the
country's year-long crisis and an effort to accommodate huge
subsidy commitments.

The International Monetary Fund last month allowed Indonesia a
budget deficit of 8.5 percent of gross domestic product, which
would be financed by foreign loans, including an additional $6
billion to the $43 billion bailout program arranged by the IMF in
November.

The IMF, which has thus far disbursed $3.9 billion of its
$11.3 billion commitment to the program, approved last Friday
another $1 billion for immediate disbursement. (rei)