Soeharto to unveil draft budget

Soeharto to unveil draft budget

JAKARTA (JP): President Soeharto is scheduled today to unveil the government's budget plan for 1995-1996, which will likely rely more on revenues from private sector activities and offer a salary increase for civil servants and Armed Forces members.

The President will deliver the budget plan in a speech at a plenary session of the House of Representatives (DPR), which is expected to pass it into law without substantial changes after two months of deliberation.

Twenty ministers briefed editors of domestic and foreign media on the state budget plan at the Ministry of Information's office here last night. All of their statements were embargoed for publication until the President delivers his address at the House session.

House members are predicting that the government will likely raise its 1995-1996 budget, to be implemented in April, by only 12 percent from this fiscal year's level of Rp 69.75 trillion (US$31.7 billion). They base this reasoning on the fact that the revenues to fund any increase can be expected only from non-oil taxes -- which are estimated to reach Rp 40 trillion in 1994- 1995.

The government will not be able to expect a substantial increase in revenues from oil and gas because Indonesia's oil production will be limited by a ceiling set by the Organization of Petroleum Exporting Countries (OPEC), which has decided to extend its production quota for one year beginning this month. Oil prices are projected to stagnate at the present level of about $16 a barrel.

This fiscal year's revenues from oil and gas are estimated at Rp 12.85 trillion, already down by 15 percent from last fiscal year.

The government is also expected not to raise its revenues from foreign aid substantially from this fiscal year's level of Rp 10 trillion because it remains committed to reducing dependence on offshore borrowing.

"The only sector that the government can expect much from is non-oil taxes," a DPR member said.

Minister of Finance Mar'ie Muhammad said recently that the lowering of income tax rates and the expansion of bases for tax collection are expected to improve the compliance of taxpayers. The lowering of the tax rates also is expected to help increase the profitability of companies, which in turn will increase their tax payments.

On the spending side, the 1995-1996 budget is likely to offer an increase of salaries for civil servants and members of the Armed Forces because without any increase, the lowest level of the salaries will be far lower than the government-set minimum levels of wages that should be paid by private sector employers.

The government announced Tuesday that private sector employers should increase their minimum wage levels by a range of between 11 percent and 35 percent beginning in April.(riz)