House passes 2004 budget bill into law

The Jakarta Post, Jakarta

The House of Representatives passed on Monday the government- proposed 2004 state budget bill into law, despite objections from some individual lawmakers who criticized the budget as lacking in stimulus and not doing anything to improve the well-being of the people.

The House plenary session endorsed the budget, which sets the deficit at Rp 24.4 trillion (US$2.89 billion), or 1.2 percent of the country's gross domestic product (GDP).

The figure was higher than the Rp 23.02 trillion, or some 1.17 percent of GDP, agreed to last week by the government and the House budget commission. This year's deficit is estimated at 1.9 percent of GDP. The government is aiming to balance the budget by 2006.

Still, it drew objections from a dozen lawmakers, who said that the higher deficit would only force the country to ask for more overseas loans as well as put more local assets up for sale to cover it.

Even without new loans, they argued, the annual state budget was already heavily burdened by the repayment of foreign debts, which in turn limited the government's ability to allocate more money on subsidies and development spending. They said in a statement that the budget did nothing to promote the welfare of the average person.

Under the 2004 budget, the government will need some Rp 26 trillion in foreign financing to help cover the deficit, which will probably mostly come from the Consultative Group on Indonesia (CGI) -- the country's traditional lenders, which will convene next month to determine the exact amount it can give Indonesia.

However, all the factions in the House said that the budget had heeded these concerns as could be seen from the subsidies allocated to ease the burden on the people despite the huge pressure from debt repayments.

They said the higher deficit was in part the result of higher subsidies. In 2004, the budget sets subsidy spending at Rp 26.4 trillion, higher than the government's proposal of Rp 23.3 trillion, mostly caused by higher spending on fuel subsidies.

Meanwhile, the budget also highlighted optimism that the economy would fare better next year than previously forecast. It sets a higher growth target (4.8 percent compared to 4 percent previously), and lower inflation (6.5 percent compared to 7 percent).

Key Figures in 2004 State Budget ----------------------------------------------------------------

(in trillion) (% to GDP) ---------------------------------------------------------------- 1. Total Revenue Rp 349.9t 17.5

1.1. Internal Revenue Rp 349.3t 17.5

1.1.1. Tax Revenue Rp 272.2t 13.6

1.1.2. Non-tax revenue Rp 77.1t 3.9

2. Total Expenditure Rp 374.4t 18.7

2.1. Cent. Govt. exp. Rp 255.3t 12.8

2.1.1. Routine Rp 184.4t 9.2

2.1.2. Salary Rp 56.7t 2.8

2.1.3. Interest repayments Rp 65.6t 3.3

2.1.4. Subsidies Rp 26.4t 1.3

2.2. Regional Govt. exp. Rp 119.0t 6.0

3. Deficit Rp 24.4t 1.2 ---------------------------------------------------------------- Source: Ministry of Finance