Soeharto unveils tight budget
Soeharto unveils tight budget
JAKARTA (JP): President Soeharto proposed a tight budget to
the House of Representatives yesterday for the fiscal year 1995-
1996 which, though up by a mere 2.5 percent in real terms,
raises the salaries of government personnel by an average 10
percent.
The draft state budget, which begins in April, will balance at Rp
78.02 trillion (US$35.5 billion) consisting of Rp 47.24 trillion in
routine (operating) spending and Rp 30.78 trillion in public
investments.
The government expects Rp 13.27 trillion (17 percent of total
revenues) from oil and gas taxes based on an average price of
US$16.5 per barrel, Rp 52.98 trillion (67.92 percent) from non-oil
taxes, duties and levies and Rp 11.76 trillion (15 percent) from
foreign loans.
The budget plan was unveiled against a robust economic growth of
more than 6.5 percent last year but with a note of caution against
inflationary pressures.
"Our inflation last year was 9.24 percent which, though remaining
one digit, was already too high, much higher than the projected
target of five percent for the Sixth Five Year Plan period (1994-
1999)," Soeharto said in his budget address.
He devoted a great deal of his speech to reminding the people of
the dangers of an overheated economy, as the one in 1991 that forced
harsh monetary measures.
"We must ensure that our economic growth, which is expected to
remain high, will not become counter productive," Soeharto added.
He called for extra caution about private borrowings overseas
because the current account deficit in the current fiscal year is
estimated to increase to $3.5 billion from $2.9 billion last year.
Soeharto reiterated the task of building a strong economy that
leads to an increasingly fair and equitable prosperity of the
people.
"That requires greater participation by the widest possible
segment of the community as well as the highest possible efficiency
and productivity," he said.
He charted out the future challenges the nation is facing amid the
major and fundamental changes in the world and called on the people
to prepare themselves for the new future.
"Internally, the governmental and economic orders must be shifted
from a centralized to a more decentralized order so as to expand the
people's initiative and creativity," Soeharto said.
Externally, he added, the flow of trade, service and capital must
be generated and facilitated.
He reemphasized the importance of further strengthening the
competitiveness of domestic producers in facing up to the year 2020,
when Indonesia must fully open up its economy to global trade within
the Asia Pacific Economic Cooperation scheme.
In this context, Soeharto stressed the need to reduce the
protection of domestic industries from import competition, which
became the subject of heated debates a few weeks ago following a
proposal from politically-well connected businessmen for high
tariff protection of their olefin plant.
"The reduction of protection must be conducted very selectively,
with planning and in stages," he pointed out.
He set three conditions for the granting of protection to domestic
industries: It should be given for a limited period of time and
should be gradually reduced; It must not be contrary to
international trade agreements as those under the World Trade
Organization, AFTA and APEC; Its level must not stifle or hinder the
growth of downstream industries.
The President reiterated the need for further withdrawal, by the
government, from economic activities that can be more efficiently
conducted by the people, especially the private sector.
"The government gives direction, support and endorsement.
Government investments will be directed more to improve the quality
of human resources and the development of economic infrastructures."
Minister of Finance Mar'ie Muhammad who, together with other
economics ministers, briefed newsmen on the draft budget on
Wednesday night, said that bank credit expansion in the next fiscal
year would be limited to 19 percent, lower than the 25 percent
increase estimated in the current fiscal year.
The government will do its utmost to check inflation this year at
six percent at the most, he said.
Mar'ie estimates the rupiah exchange rate against the American
dollar at Rp 2,256 at the end of March, 1996, or representing a
depreciation of three percent from the estimated level at the end of
next March.
Bank Indonesia's Governor Soedradjad Djiwandono projected export
growth in the fiscal year 1995-1996 at 16.5 percent, higher than the
14.5 percent estimated for 1994-1995, and import growth at 15
percent.
But since private capital inflows are projected to increase to
$5.07 billion and official capital inflows to $6.48 billion, the
overall balance of payments at the end of March, 1996 will still
produce a surplus of $1.8 billion despite the estimated deficit of
$4.1 billion in the current account (trade of merchandise and
services).
"We therefore expect our foreign reserves to increase from $13.7
billion at the end of next March to $15.5 billion or equivalent to
five months of imports in March, 1996," Soedradjad said.(vin)