Projections for 2002 budget revised down

Berni K. Moestafa, The Jakarta Post, Jakarta

The House of Representatives approved on Tuesday government- proposed revised assumptions for the 2002 draft state budget in a move to take account of the heightened uncertainty surrounding the global economy next year.

The government has revised downward almost all key assumptions in the 2002 state budget draft which was submitted to legislators last month.

Under the new assumptions, gross domestic product (GDP) growth has been lowered to four percent from five percent previously.

The rupiah's exchange rate against the U.S. dollar has been lowered to 9,000 from 8,500, while forecast inflation has been upped to nine percent from eight percent.

The Bank Indonesia interest rate is maintained at 14 percent, while the original assumed crude oil price of US$22 per barrel has also been maintained.

At the same time, the oil production target has been raised to 1.32 million barrels per day (bpd) from 1.23 million bpd.

The revisions followed a two-day meeting with the House budget commission, and come as the government braces for a full-fledged global recession.

A change in the budget assumptions will automatically lead to the government adjusting its revenue and expenditure targets.

In the original draft budget, the government assumed a deficit of 2.5 percent of GDP. The revised version sees a deficit of 2.7 percent of GDP.

But as the government has accepted legislators demands for changes to the proposed revisions, the revised deficit remains tentative.

Legislators have demanded that the crude oil production assumption be increased by another 20,000 bpd over the government-proposed target.

This would translate into higher oil and gas revenues for the budget, which could alter the proposed deficit target.

Elsewhere, the government turned down legislators' demands that Bank Indonesia interest rates be lowered.

Legislators argued that the high interest rates were hampering the banks from resuming lending so as to spur economic growth.

Minister of Finance Boediono, who attended the budget discussion, said the cost of adjusting the budget if interest rates ended up higher next year was too expensive.

The government has tied a large portion of the interest on its bonds to Bank Indonesia's interest rates.