Habibie ready to unveil his 1st budget today

JAKARTA (JP): President B.J. Habibie is set to unveil his first draft budget to the House of Representatives (DPR) today amid simmering political tensions and a sagging economy.

The President is scheduled to address the House plenary session at 10 A.M. to outline the budget for the 1999/2000 fiscal year, which begins on April 1.

The House will then deliberate the draft budget and pass it into law.

Unlike during the 32-year rule of former president Soeharto, the government is likely to face a challenge from the House before the budget is approved. Under Soeharto, the legislative body gained notoriety as the government's rubber stamp.

The government is expected to allocate considerable sums of money to provide subsidies in the 1999/2000 budget under the auspices of the social safety net programs and to assist small- scale entrepreneurs.

The government will also disclose the funds it intends to allocate to finance recapitalization of the country's beleaguered banks.

Many analysts have predicted that the upcoming budget will run at a large deficit as the result of depressed oil prices and stunted tax revenues generated by the government since the economy sank into recession.

In a November report, finance minister Bambang Subianto said that the government would assume a crude oil price of between US$12 and $13 per barrel, a rupiah-U.S. dollar exchange rate of between Rp 7,000 and Rp 8,000, economic growth between 1 percent and minus 1 percent, and inflation of between 15 percent and 20 when drafting the 1999/2000 budget.

Inflation was recorded at 77.63 in 1998.

Economist Pande Radja Silalahi of the Center for Strategic and International Studies called on the government and the House to avoid making a major issues of the assumptions used to draft the budget.

"Assumptions used to calculate the budget must be regarded merely as a guide and prone to changes," Pande told The Jakarta Post.

In 1998, the government was forced to revise the 1998/1999 budget three times because of the rupiah's roller coaster ride against the dollar.

Many have predicted further volatility in the rupiah this year, particularly around two major political events -- the general election in June and the subsequent presidential election in November.

It is feared that both events could lead to widespread violence and chaos.

Pande expressed hope that the government would exercise wisdom and austerity in next year's budget, pointing out that economic and political uncertainty would linger in the country and that a global economic downturn was also a real possibility.

"Unlike in previous fiscal years, the degree of uncertainty will be very high and it will be hard to make precise calculations for the budget," he told the Post on Monday.

Pande warned the government against including populist measures in the budget to improve the political standing of the current administration, which continues to be undermined by its close association to Soeharto.

The government should instead focus on revitalizing economic activities using sound economic judgment, particularly in the real sector and through the social safety net program, he said. (das)