RI's next budget sees rupiah at 7,500 to dollar

JAKARTA (JP): The government assumes that the rupiah should stay at around 7,500 against the U.S. dollar in the next fiscal year starting in April 1999.

In a report to the monthly cabinet meeting on economic matters on Wednesday, Minister of Finance Bambang Subianto said that the calculation for 1999/2000 budget assumes that "the rupiah's exchange rate should range between Rp 7,000 and Rp 8,000 per U.S. dollar."

Meanwhile, Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita told journalists before the cabinet meeting that he was confident that the rupiah would strengthen further next year.

"We are thankful for the current rupiah level that remains stable without too much fluctuation despite the many political jolts in recent times," he said.

The rupiah has been hovering around 7,500 to the dollar during the past two months despite a series of bloody unrests in the country.

The rupiah closed at 7,450 to the greenback in Jakarta trading on Wednesday, compared to near 12,000 level in early September, but far from the pre-crisis level of 2,450..

The finance minister also revealed in the report that the next state budget projects inflation to fall to between 15 percent and 20 percent -- far lower than 80 percent for this calendar year.

As rupiah would remain steady and inflation rates ease, banking interest rates should fall accordingly, added the report which was distributed to journalists after the cabinet meeting at the Bina Graha presidential office.

Prices of crude oil, one of the main contributors to the budget's revenues side, should average at US$12 to $13 per barrel, with crude oil output projected at 1.52 million barrels per day.

The report said revenues for the next budget would be affected by People's Consultative Assembly's decree No. XV/MPR/1998 on the granting of stronger regional autonomy and a better distribution of the revenues from the tapping of natural resources between the central government and provincial administrations.

"That decree would reduce the central government's revenues from oil and gas and other natural resources (forest and mining royalties)," the report said.

Nevertheless, it projects that the government would earn some Rp 12 trillion from the privatization of state firms and Rp 4 trillion in dividends from state firms.

The government targets to increase income from cigarette excise tax, but revenues from export taxes should decline as the government plans to cut export tax on crude palm oil. Currently exports of this commodity is subject to 60 percent tax.

On the spending side, the budget would record an expansion in routine expenditures as the government plans to increase the salaries of civil servants and members of the Armed Forces.

The government would also spend a considerable amount of money to recapitalize banks, to finance various subsidies including those for fuel, electricity and loans to deprived sectors as well as to fund social safety net program.

State Minister of National Development Planning Boediono said social safety nets would still get high priority in the next budget as such programs could directly strengthen the purchasing power of the people.

Boediono conceded that the next budget would suffer a deficit equivalent to six percent of the country's gross domestic product, depending on the availability of foreign aid.

According to the finance minister's report, the government expects to secure $9.82 billion in official foreign borrowings consisting of $6.32 billion in cash loans and $3.5 billion in loans tied to specific development projects.

The government would also save some $2.7 billion from the rescheduling of sovereign debts due in 1999/2000. (rid/prb)