President asked to be more frugal

JAKARTA (JP): Finance minister Prijadi Praptosuhardjo has asked President Abdurrahman Wahid to be more frugal, including curtailing his penchant for overseas trips amid signs of a greater-than-expected deficit in the 2001 state budget.

"I said (to the President), 'Pak, right now I'm monitoring the state budget. This (the state budget) position could worsen.' So, I asked the President to be thrifty," Prijadi told reporters on Tuesday following a meeting with Abdurrahman at Merdeka Palace.

"Then the President replied, 'Yes, yes. I'm sorry. Well, let's start to economize, then'," Prijadi was quoted as saying by Antara.

When asked whether he had also suggested that the President avoid making overseas trips, he said that if an overseas trip was necessary it could go ahead, but it should be well-planned in order to reduce costs.

Since assuming office in October 1999, Abdurrahman, the country's first democratically-elected president, has made frequent overseas trips. He has argued that the trips were important for drumming up international support for troubled Indonesia.

But his critics have lambasted the President for leaving the country at crucial moments and pointed out that he would be better off focusing on trying to resolve the various domestic problems facing the country, including widespread social unrest and outbreaks of deadly violence.

Abdurrahman had earlier canceled a trip to Australia scheduled to begin on Tuesday.

Prijadi had earlier told the media that the 2001 state budget could suffer a greater-than-expected deficit amid signs that the budget targets could be missed, as well as the delay in the full implementation of the planned fuel price increase.

A significantly larger deficit could trigger a second economic crisis in the ailing country.

The 2001 state budget projects a deficit of around 3.7 percent of gross domestic product.

But, Prijadi said that the current weakening of the rupiah against the U.S. dollar and rising interest rates could force the government to revise the budget.

The rupiah dropped to a 30-month low of around Rp 11,500 per dollar last month amid domestic political uncertainty and a standoff between the government and the International Monetary Fund.

The rupiah ended trading late on Tuesday at Rp 10,450 per dollar, compared to the budget assumption of Rp 7,800 per dollar.

The weakening of the local unit has prompted Bank Indonesia to allow the benchmark interest rate on one-month SBI promissory notes to rise to around 15.58 percent last week, compared to the budget assumption of 11 percent.

Prijadi has said that a 1 percent increase in the SBI rate could cause an increase of around Rp 2.1 trillion in the interest cost of the government's bank recapitalization bonds.

The government has issued around Rp 430 trillion worth of bonds to help finance the massive bank recapitalization program. The budget makes provision for the interest on the bonds.

Prijadi also said that the delay in the full implementation of the fuel price hike plan would put further pressure on the budget.

The government initially planned to increase fuel prices in April in a bid to reduce the government subsidy for the commodity. But, as a result of the current political uncertainty, the government has only raised the fuel price for industrial users to between 50 percent and 100 percent of the market price,. The fuel price for small companies, the public, the state electricity utility and the public transportation sector remains unchanged.

Prijadi confirmed on Tuesday that his office was sounding out measures to raise domestic revenues and cut spending so as to relieve the pressure on the state budget.

Asked about plans to seek new foreign loans at an upcoming key donors' meeting in Jakarta, Prijadi said that the meeting would basically review the country's performance as regards the achievement of key economic reform targets over the past six months.

He said that it was still not definite that the government would ask for new loan commitments.

The country's donors are grouped in the Consultative Group on Indonesia (CGI).

Pre-CGI meetings will be held on April 23 and April 24, to be followed by a full CGI meeting in October or November of this year.

At the last CGI meeting in Tokyo, the donors pledged around US$5.2 billion in loans to Indonesia. (rei)