House want Rp 20 trillion economic stimulus

House want Rp 20 trillion economic stimulus

Dadan Wijaksana, The Jakarta Post, Jakarta

The House of Representatives' budget committee is seeking a
stimulus package of up to Rp 20 trillion (about US$2.2 billion)
for next year's state budget to help the economy cope with the
impact of the Bali bombing, a legislator said on Thursday.

The government's proposed package amounts to Rp 5.9 trillion.

"Such an allocation is too small. The stimulus wouldn't be
effective because that amount marks an insignificant addition to
development spending," the House's budget committee deputy
chairwoman Angelina Patiasina told reporters after a hearing with
the government.

Additional spending by Rp 5.9 trillion alone, would inflate
the budget deficit to an estimated 1.6 percent from 1.3 percent
of gross domestic product (GDP), which measures the country's
annual output of goods and services.

"It would be good if we can keep the deficit low, but I think
development spending could be increased by Rp 20 trillion,"
Angelina said without saying where the government would raise the
money from.

She said it was possible to limit the subsequent deficit
increase to between 1.7 percent to 1.8 percent of GDP.

The House and the government are in talks over revisions to
the 2003 draft state budget to take account of the economic
fallout of the Oct. 12, Bali bombing.

Tax revenues have been slashed by around Rp 7 trillion on
fewer spending activities as renewed security jitters undermine
business confidence.

Still, Angelina was upbeat that income as a whole could rise
by as much as Rp 9 trillion from the initial target of Rp 327.8
trillion.

She said additional revenue could come from higher oil exports
as world oil prices had strengthened.

Reflecting the upward trend, the government revised its oil
price assumption to $22 per barrel from $20.5 per barrel.

The Indonesian Bank Restructuring Agency (IBRA), which sells
state assets to fill out the budget deficit, has seen its target
raised to Rp 18 trillion from Rp 12 trillion.

However, much of the higher targets would be offset with
higher expenditure such as interest payments on domestic debts.

The terrorist strike, which killed more nearly 200 people,
dealt a massive blow not only to the tourism sector but also to
the overall investment climate in Indonesia.

Among the first downward revisions to the state budget was
next year's economic growth forecast, now down by a full
percentage point to 4 percent.

Indonesia however needs to grow by at least 5 to 6 percent to
effectively reduce its mass unemployment rate and lift millions
out of poverty.

An increase in development spending is seen as crucial to
mitigate the impact of the Bali bombing, marked by mass lay offs
in the tourism sector, and a plunge in investment spending.

The state budget can help stimulate the economy by way of
channeling more money into economic sectors like construction.

Aside from government funded investment projects, additional
projects plans have been drawn up to restore Bali's tourism
sector.

But even at just Rp 5.9 trillion for a stimulus package, the
government will need additional aid from its major creditor
countries under the Consultative Group on Indonesia (CGI).

An informal CGI meeting early November ended with creditors
promising more aid to help Indonesia cope with the Bali fallout.

Although no amount has been pledged, the World Bank which
chairs the meeting, said Indonesia's financial needs because of
the Bali bombing was "not too significant" and later indicated
the extra loans at several hundreds millions of dollars.