IMF welcomes revised targets of RI's 2004 draft state budget

Dadan Wijaksana, The Jakarta Post, Jakarta

The International Monetary Fund (IMF) supported on Friday revisions to the 2004 draft state budget by lawmakers, saying the new targets, including higher economic growth, were reasonable and within expectations.

Daniel Citrin, IMF Asia Pacific senior advisor, said that the economy would grow by around 4.8 percent next year, as agreed to by the government and lawmakers.

"I think it's a good budget," Citrin said.

"We hope for growth at about that level because the economy is continuing to recover, and growth prospects will be in line with the Indonesian government's target," he added.

Citrin, who is currently in town to lead an IMF team to carry out its final review on the country's economy, was commenting on the deliberation results on the draft budget, which saw revisions to most of the figures and highlighted optimism that the economy would fare better than previously forecast.

On Thursday, the House budget commission and the government completed their deliberations on the draft, setting a higher growth target, lower inflation and interest rates and a smaller budget deficit, than those proposed in August.

The deficit is set at Rp 23.02 trillion, or 1.17 percent of the country's gross domestic product (GDP), smaller than the government's initial proposal of Rp 24.9 trillion, or 1.2 percent of GDP.

Total expenditure is set at Rp 373.3 trillion (US$44.18 billion), up from the initial proposal of Rp 368.79 trillion, with revenue estimated at Rp 349.9 trillion against Rp 343.87 trillion previously.

Other final targets include 4.8 percent GDP growth, against 4.5 percent stated in the draft; inflation of 6.5 percent (previously 7.0 percent); an average rupiah exchange rate of 8,600 to the dollar (Rp 8,700) and a three-month Bank Indonesia interest rate of 8.5 percent (9.0 percent). The oil price was earmarked at $22 per barrel ($21 per barrel) with oil production of 1.15 million barrels per day.

During Thursday's hearing, it was revealed that the optimism was based on an assumption that the global economy would continue to improve, which is expected to help boost investment and exports, coupled with continued strong consumption at home due in part to estimated high levels of spending during the political campaigns in the run-up to the general elections.

Citrin's positive note should provide the government with more confidence in meeting those targets.

Minister of Finance Boediono stressed that if the government worked harder while the economy was also free from shocks, the economy next year could grow even more.

If the country could secure smooth elections, investor confidence in the country would then rise accordingly, Boediono said.

For this year, the state budget has targeted the economy to grow by 4 percent.

2004 Economic Growth Forecasts

2003 2004

World Bank 3.5% 4.0%

ADB 3.4% 4.0%

StanChart 3.8% 4.3%

Mandiri 3.9% 4.2%

State Budget 4.0% 4.8%

Source: The Jakarta Post file