House agrees on more funds in 2005

Tony Hotland, Jakarta

The House of Representatives state budget commission approved on Tuesday a government proposal to increase the size of special funds for regions in the 2005 state budget.

Commission chairman Abdullah Zainie said that the special funds would be increased to Rp 3.8 trillion (US$404.25 million) next year from Rp 2.8 trillion in the current 2004 state budget.

He said that the additional funds would help finance clean water projects and provide farmers with seeds and fertilizer.

Since the implementation of regional autonomy, the central government has been providing special funds for regions, used in financing projects in four sectors: elementary school facilities, local health centers, irrigation and fish marketing.

Abdullah said that the House has yet to approve whether the proposed two additional sectors should be included in the special fund scheme.

"It is possible that we'll add only one sector to the existing ones if, in our discussions, we calculate that the funds can cover only one," he said.

The budget commission and the government on Tuesday completed their two-month debate of the 2005 state budget draft. The results will later be delivered to a House plenary session for final approval.

As reported earlier, in the 2005 state budget, the government projected a lower budget deficit of Rp 16.6 trillion, or 0.8 percent of gross domestic product (GDP).

In comparison, the current budget assumes a deficit of Rp 24.4 trillion or 1.2 percent of GDP.

The government will finance the deficit from proceeds to be raised from the sale of state assets. A lower deficit will mean lower government borrowing and help reduce the debt burden.

The government, which has struggled with large deficits for the past five years, hopes to balance the budget by 2006.

Elsewhere, the 2005 budget assumes a higher economic growth of 5.4 percent compared to this year's estimate of 4.8 percent.

They are basing their estimates on increased investment and export to accelerate economic growth, which for the past couple of years has been largely dependent on strong domestic consumption.

Inflation is projected at an average of 5.5 percent compared to this year's estimate of 6.5 percent.

Fuel subsidies for 2005, however, will be increased to Rp 21 trillion compared to around Rp 14.5 trillion in the current budget. The 2005 budget assumes a higher oil price average of US$24 per barrel from $22 per barrel in the 2004 budget.

This 2005 state budget plan, however, can either be accepted or revised by the new incoming government, which will take office in October.

The country is currently preparing for the presidential election on July 5. If a simple majority is not won by any of the five candidates in the first round, a second round will be held in September between the top two.