Susilo's budget revision plan hailed
Susilo's budget revision plan hailed
Rendi A. Witular, Jakarta
Experts agree on the plan by president-elect Susilo Bambang
Yudhoyono to revise the 2005 state budget, citing the urgency to
revise the crucial oil price assumption to better reflect current
developments in global oil prices.
Adjustments to the oil price are needed for the next
government to ensure a more accurate benchmark to set other key
assumptions in the state budget; chief among these is the fuel
subsidy, as well as revenue from oil and gas and revenue-sharing
between central and local governments.
"The current economic situation has changed quite fast, so the
revision (of 2005 state budget) is needed.
"I think the most important assumption to be immediately
revised is the price of oil," Minister of Finance Boediono told
reporters on Sunday.
Boediono was commenting on Susilo's victory speech on
Saturday, in which he spelled out an immediate need for his
administration to revise the 2005 state budget during his first
months in office.
Boediono said that the 2005 state budget was not made to
commit the new government to it, but was more as a legal backup
to ensure the availability and sustainability of the state's
finances during governmental transition.
In the first 2005 state budget draft, the oil price was set at
an annual average of US$24 per barrel. Based on that, revenue
from oil and gas would be fixed at Rp 47.1 trillion ($5.23
billion) and revenue sharing for regional governments at Rp 31.2
trillion.
The oil price assumption is especially crucial in the
calculation of the oil subsidy for next year, which is earmarked
at Rp 19 trillion.
Mandiri Securities head of research Kahlil Rowter also agreed
that the upcoming administration needed to revise next year's
state budget, primarily the oil price assumption, as $24 per
barrel was unrealistic. The world oil price closed at over $50 on
Friday.
Kahlil said that a realistic oil price assumption would help
the government to cut fuel subsidies at a more precise level, and
to accurately assume the state budget deficit level, which was
earmarked at Rp 16.8 trillion.
"Crude prices have been averaging more than $40 a barrel at
present and are projected to remain at that level next year. The
most reasonable oil price would be at around $35 a barrel," said
Kahlil.
"Changes in the assumption will eventually cause overall
changes for state revenues and expenditures," he said.
For every dollar that the world oil price is above the
assumption, the impact will be between Rp 100 billion to Rp 150
billion in extra expenditure requirements, according to the
Ministry of Finance.
Rocketing oil prices mean that the government has to allocate
more of the state budget for fuel subsidies. Even based on an oil
price assumption of $36 in the 2004 state budget, fuel subsidies
were budgeted at Rp 59.2 trillion, four times higher than the Rp
14.5 trillion projected in the 2005 draft earlier this year.
The central government pays for all of the fuel subsidies,
while oil and gas revenues must be shared with regional
administrations.
Kahlil, however, was concerned with a possible lingering
process for the budget revision, as Susilo could choose a whole
new group of people for his economic team. In addition, most
members of the House of Representatives' budget commission were
new to the process.
"I fear that the revision will take a long time, because they
have to start again from scratch. The revision should be
concluded before January, since the state budget should be fully
implemented next year," said Kahlil, adding that a delay in
finishing the revision would cause uncertainties for the business
community. Editorial -- Page 6