House ends debate on 2004 budget, cutting deficit target to 1.15% of GDP
House ends debate on 2004 budget, cutting deficit target to 1.15% of GDP
The Jakarta Post, Jakarta
The House of Representatives and the government wrapped up on
Thursday the deliberation of the 2004 state budget draft, which
saw a cut in the deficit target to 1.15 percent of gross domestic
product (GDP) from 1.2 percent earlier proposed by the
government.
After weeks of deliberation, lawmakers at the House commission
on budgetary affairs slashed the deficit target to Rp 23.02
trillion (US$2.72 billion) from the government's proposal of Rp
24.9 trillion submitted in August.
Legislator Abdullah Zainie, who presided over the hearing that
lasted until late on Thursday, said that the draft would now wait
for final approval from the House's plenary meeting, slated for
Nov. 11, before becoming a law.
The lower deficit resulted from a higher-than-expected
revenue, boosted by incomes from tax. Tax revenue was raised from
Rp 271 trillion to Rp 272.2 trillion, which helped increase total
revenue to Rp 349.9 trillion from Rp 343.9 trillion set under the
initial proposal.
The deficit target is in line with the government's commitment
for a gradual deficit decline before finally balancing it by
2006.
This year, the state budget has targeted the deficit at 1.9
percent of GDP, or Rp 34.4 trillion.
Revisions were also made in most of the figures in the draft,
including macroeconomic assumptions.
According to Zainie, the revision was inevitable after taking
into account that next year could be a challenging one for
Indonesia, as not only will it hold its first ever direct general
elections, but it will also mark the first budget year without
the presence of the International Monetary Fund's (IMF) financial
assistance.
Having decided not to extend the current IMF's special program
later this year, means that the country would no longer be
eligible for the Paris Club of donors debt rescheduling.
This puts additional burdens on the already cash-strapped
state budget and limits its ability to allocate more on
development spending to help prop up economic growth, crucial to
reducing chronic problems of poverty and unemployment.
Despite the challenges however, lawmakers and the government
remained optimistic over the economic prospects next year, and
even revised upward the economic growth assumption from the
initial 4.5 percent to 4.8 percent.
The optimism was based on the assumption that the global
economy would continue to improve, coupled with continued strong
consumption at home.
On the domestic front, a strong consumer spending is very
likely in 2004, spurred by a large amount of expected spending by
political parties during their campaigns.
Elsewhere, it was also revealed during the hearing that to
help cover the deficit, the budget has also earmarked Rp 5
trillion in proceeds from the privatization program, Rp 5
trillion from bank sales, aside from the government's new bond
issues worth Rp 11.4 trillion -- both domestic and global bonds.
Budget Basic Assumptions
Revised Initial
Currency rate (Rp) 8,600 8,700
Inflation (%) 6.5% 7.0%
Growth (%) 4.8% 4.5%
SBI 3-month (%) 8.5% 9.0%
Oil price ($/barrel) 22 21
Oil output (bpd) 1.15m 1.15m
Source: House budget commission
SBI = Bank Indonesia promissory notes
bpd = barrels per day