RI targets 1.5% surplus by 2004

The Jakarta Post, Jakarta

The government aims to pull its budget from a chronic deficit into surplus by 2004, betting on an ambitious boost in economic growth and tax revenue, according to the latest slew of economic assumptions released on Tuesday.

Government data shows it targeting a state budget surplus of 1.5 percent of gross domestic product (GDP) by 2004.

That compares with this year's targeted budget deficit of 2.5 percent of GDP, or around Rp 42 trillion (US$4.2 billion).

Underlying the surplus target is a set of economic indicators the government hopes to meet, starting from 2000.

A key indicator that will determine whether or not the budget surplus can be achieved is economic growth.

According to the government, the economy should have grown by 4 percent to 5 percent in 2000. With growth of 4.8 percent that year the target was reached, but with 3.32 percent the year after, it fell short of the targeted 4.5 percent.

In the following years, the economy must achieve a growth rate of 5 percent to 6 percent in 2002, 6 percent to 7 percent in 2003, and another 6 percent to 7 percent in 2004.

That target now looks difficult to achieve, with the still- sluggish global economy stacked against it.

There is some faint hope of a turnaround, but analysts said a rebound would unlikely come soon enough to give the economy a significant boost this year.

Until then export revenues would hardly drive the economy while investment was also nowhere close to picking up.

Tax revenues come hand-in-hand with economic growth and over the next three years the government hopes to expand its tax ratio to 16 percent from 12 percent currently. The ratio compares a country's tax revenue with its population size.

Raising state revenue to generate a budget surplus also requires the government remove obstacles that have bogged down the economic recovery so far.

The country's banking sector is moving too slowly toward recovery, casting a pall over manufacturers in need of working capital.

Elsewhere, a huge portion of Indonesia's economic potential is locked inside the Indonesian Bank Restructuring Agency (IBRA), which took over assets from ailing banks during the 1997 financial crisis.

Getting these assets back to work in the hands of the private sector is the key to generating economic growth.

To achieve a budget surplus, the government is also slashing spending, with cuts in energy subsidies leading the way.