Revised budget tolerable: House member

JAKARTA (JP): Members of the House of Representatives yesterday expressed understanding over the government's decision to revise the 1998/1999 draft state budget.

But the Indonesian Democratic Party (PDI) faction warned of the adverse impacts of the government's tough economic reforms taken to deal with the current economic crisis.

"Those weaknesses are understandable and unavoidable," said Nico Daryanto, PDI's spokesman at the House's plenary session held to hear the response of the House's four factions on the change in the draft state budget.

The new draft will be further discussed by the House's budgetary commission in the coming weeks before being approved.

Nico said his party understood that the current volatility of the rupiah caused difficulties in drafting the budget.

He suggested the budget be periodically evaluated, focussing on making more accurate priorities which would enhance transparency and efficiency in the utilization of funds.

PDI said the implementation of the budget would be supported by overseas aid, primarily from the International Monetary Fund (IMF).

"But the PDI faction wants to remind the government to never dance to foreign-orchestrated music while formulating basic policies," Nico said, adding that such a submission would be giving up the country's economic sovereignty.

The government announced the revised draft budget on Jan. 23, after an earlier Jan. 6 budget proposal was lambasted by the currency market due to its unrealistic assumptions and non- adherence to the IMF recommendations.

The IMF-sponsored budget is balanced at Rp 147.22 trillion (US$1.472 trillion), an increase of more than 45 percent from the previous fiscal budget of Rp 132 trillion.

Questioning

The House's four factions, including the United Development Party (PPP), the Armed Forces, and the dominant Golongan Karya (Golkar), also questioned the new assumptions in the budget.

The new budget sets a rupiah-U.S. dollar exchange rate of Rp 5,000, economic growth at zero percent, an inflation rate of 20 percent and an average oil price of $17 per barrel.

"The PPP faction demands an explanation on what will be done if the assumptions cannot be met," said Hamzah Haz, head of the faction.

The PDI faction also questioned what parameters were used to project the zero percent growth.

Nico suggested the government reconsider postponing the repayment of the state's overseas loans by asking foreign creditors for their understanding of the country's current situation.

The budget allocates a total of Rp 37.8 trillion for servicing the debts' interest rates and principals.

He also said the government should reconsider its decision to abolish the state's monopoly on nine basic staple commodities arguing the move would send prices skyward at the expense of low- income citizens.

"During the current economic situation, we should continue the monopolies... the country should not totally surrender to the IMF," said Nico, who threatened to walk out of yesterday's session when Minister of Finance Mar'ie Muhammad unexpectedly left the meeting a few minutes before PDI was scheduled to deliver its responses.

The monopolies on the basic foodstuffs is set to be abolished by the end of March. Rice, however, will remain under the monopoly regime.

Last month, the government agreed to some 50 points of IMF- sponsored reform programs in return for bailout funds expected to amount $43 billion.

On the banking reform programs, the government decided to guarantee domestic bank obligations to creditors and debtors.

Both PDI and PPP demanded transparency in the bailout process.

The two factions also warned of the harsh implications that might result from allowing foreign banks to freely operate in the country.

Both the Golkar and PPP factions called on the government to increase the salaries of government civil employees.

Despite the criticism, however, the factions generally agreed that the country needed to take the bitter medicine in order to get the economy back on track.

"We expect the government to consistently implement the reform programs," said Mubha Kahar Muang, spokesperson for the Golkar faction. (08).

Current budget -- Page 8