Moderate rise in state budget still feasible: House members
JAKARTA (JP): A moderate 15 to 20 percent rise in the 1995-96 state budget is still feasible despite the government's grim outlook on domestic resources, say members of the Budgetary Commission of the House of Representatives (DPR).
Speaking at the conclusion of a four-day preliminary deliberation on the state budget for 1995-96, all of the commission's four factions agreed that there is still much room for budget expansion.
Factions of the ruling Golongan Karya (Golkar) and Armed Forces believe that prices of crude oil will reach an average of US$17 per barrel next year, even though Iraq could re-enter the world's oil market during that period.
"The price of natural gas, which is related to developments in crude oil prices, will automatically be boosted," R.P. Soebagio, spokesman for the Golkar faction, said about the reason behind his faction's optimism.
The government's tax receipts from the oil and gas sector are projected to reach Rp 12.85 trillion (US$5.9 billion) this fiscal year, accounting for around 18.5 percent of the total 1994-95 budget. The receipt projection is calculated on an average price of $16 per barrel.
Minister of Finance Mar'ie Muhammad said earlier that the 1995-96 budget would be kept at the same level as that for this fiscal year not only due to uncertainties in the world's oil market but also because of the expected flat growth in receipts from non-oil sectors.
Tax
He said that the government's decision to lower income tax rates beginning next year would limit the growth of the tax receipts outside the oil and gas sector, which are estimated to reach Rp 46.88 trillion in the present fiscal year.
The receipts from non-oil sectors have become more important in the last five years not only due to the government's determination to reduce foreign debts but also due to the country's declining oil reserves. Indonesia's oil production -- including condensate -- has reached its maximum level of 1.5 million barrels per day.
The factions of Golkar, the Armed Forces and the Moslem- dominated United Development Party (PPP) feel that an increase of around 15 percent is still possible. In addition, the government's commitment to stronger law enforcement and tax expansion should further raise the tax coverage ratio, thereby offsetting the negative impact of the reduction of the income tax tariffs.
The Indonesian Democratic Party (PDI) said that the rise should be around 20 percent as the increase of around 10 percent would cover only the losses caused by inflation, which is not expected to surpass nine percent.
The PPP and PDI factions, however, warned the government to work harder to improve the business climate and also to encourage more foreign and local investments.
The two factions believe the role of the private sector will be more dominant in the country's economy as a larger portion of the state budget will be used mainly for the government's routine expenditures.
Sa'di Zen Noor, spokesman for the PPP faction, said that the government should watch the inflow of foreign debts more carefully, both for government agencies and the private sector.
Indonesia's external debts have reached a stunning level of $93 billion, making the country the third largest borrower in the world. Around 60 percent of the total debts are owed by the government and the remaining 40 percent by the private sector.
Sa'di said that the government should restrict private borrowing because a further increase would hurt the whole economy.
The government's foreign debt reached a total of $56.84 billion as of August this year, $7.31 billion (around 12.9 percent) coming from the United States, $25.23 billion (44.4 percent) from Japan, $2.93 billion (5.2 percent) from Germany, $10.08 billion (17.7 percent) from the World Bank, $4.38 billion (around 7.7 percent) from the Asian Development Bank (ADB) and the remaining 6.9 billion (12.1 percent) from other financial institutions and donor countries.(hen)