IMF agrees to revised budget assumptions
IMF agrees to revised budget assumptions
Berni K. Moestafa, The Jakarta Post, Jakarta
The International Monetary Fund (IMF) has agreed to the
revision of key assumptions in the 2002 state budget draft, to
ease Indonesia's budget targets in the face of a global economic
recession.
"They (the IMF) don't object to the changes in the 2002 budget
assumptions," Minister of Finance Boediono said after a meeting
with the House of Representatives' budget committee.
The government and legislators agreed on Tuesday to a set of
changes regarding the key assumptions for next year's state
budget.
The revisions followed new waves of uncertainty amid fears of
a prolonged global economic downturn.
Economic growth, as measured by gross domestic product (GDP),
was reduced to 4 percent from 5 percent, and the rupiah exchange
rate against the U.S. dollar was lowered to 9,000 from 8,500.
Inflation was raised to 9 percent from 8 percent, while the
Bank Indonesia interest rate target was maintained at an average
of 14 percent.
The oil production target, a large contributor to state
revenue, was raised by 20,000 barrels per day (bpd) to 1.32
million bpd. Crude oil prices were maintained at US$22 a barrel.
The IMF dispatched a high level mission to Jakarta last week
to review this year's state budget performance and next year's
state budget outlook.
The team, which left the capital on Wednesday, said it saw no
need to revise this year's budget revenue targets, including
those covered under the current Letter of Intent (LoI).
The LoI contains a set of reform targets the government must
meet to obtain the IMF's aid.
Among the reform targets vital for the budget are the
government's privatization and asset sales program.
The two revenue sources should help finance this year's budget
deficit, which the government hopes to contain at 3.7 percent of
GDP.
Asset sales have been progressing slowly and there have been
no proceeds from privatization thus far.
The government has earmarked Rp 6.5 trillion (about US$650
million) in revenue from its privatization program this year.
Boediono acknowledged that the IMF had questioned the slow
progress made in asset sales and privatization.
He said they advised the government to speed up efforts to
achieve those targets.
To catch up on the deficit financing, he said that the
government would ask for the disbursement of foreign loans that
were still in the pipeline.
"There are some (loans) still pending, those from the World
Bank, ADB (the Asian Development Bank) and probably also from
Japan.
"We will request that the disbursement of these loans be
expedited," he said, without remembering their total value.
The ADB is reportedly withholding a US$600 million loan
tranche until the government has met the bank's preconditions.
Elsewhere, Citibank N.A. economist Anton Gunawan said the
revised budget assumptions were still too optimistic.
He said that the Bank Indonesia interest rate next year would
likely go higher than the average 14 percent targeted.
"There is too much pressure to raise interest rates," he said.
He said foreign debt payments, inflationary pressure from cuts
in energy subsidies and a weak rupiah reeling from domestic woes
could prevent interest rates from relaxing.
"We predict an average rupiah rate of about 10,000. Inflation
is likely to come in at double digit rates, but slightly better
than this year," Anton added.