[Kabar-indonesia] RI '06 deficit may dip to 1% of GDP on efficiencies: Minister

[Joyo at aol.com]

The Jakarta Post
Monday, October 9, 2006

2006 deficit may dip to 1% of GDP on efficiencies: Minister 

The Jakarta Post, Jakarta

This year's budget deficit may reach a lower 1 percent of gross domestic 
product (GDP), from a previous 1.3 percent, on "more efficient spending", the 
Finance Ministry said.

But whether the narrower deficit will benefit Indonesia's economy is yet to 
be seen, as it came from an increase in unspent budget allocations. 

"The deficit may only be 1 percent because our preliminary assessment shows 
that there may be some allocations unspent amounting to some 0.2 percent of GDP 
by the year's end," Finance Minister Sri Mulyani Indrawati said last week. 

The government and the House of Representatives had recently revised the 2006 
state budget, agreeing on a deficit of Rp 40 trillion (US$4.3 billion), or 
1.3 percent of Indonesia's GDP. This is up from its previous estimate of Rp 22.4 
trillion, or 0.9 percent of the GDP. 

Last year's budget deficit had also ended up at only 0.5 percent of GDP, from 
a 0.7 percent projection, due to many budget allocations being unrealized. 

Lower government spending, particularly on development projects, had 
contributed somewhat in slowing down economic growth in 2005, wrapping up at only 5.6 
percent from 6.2 percent in the year's first quarter, as private consumption 
and investment still staggered from last year's fuel price hike. 

For 2007, the government is proposing a deficit of 0.9 percent of GDP. The 
2007 budget is still being deliberated by the House. 

Sri Mulyani said, however, that the possible lower deficit this year would be 
positive for state finances, citing several savings having been made from the 
implementation of a new presidential decree on project procurement 
emphasizing open bidding. 

"Such project biddings have resulted in lower project costs," she said. "So 
if the situation is like that, then I think we should be grateful, because it 
is a good indication, showing we can reduce inefficient spending." 

Data from the ministry's Directorate General for the Treasury shows that this 
year's budget deficit as of Sept. 29 has amounted to Rp 13.2 trillion, with 
Rp 403.4 trillion in expenditure and a revenue of Rp 390.2 trillion so far. 

Director General for the Treasury Mulia P. Nasution expects the realization 
of this year's projected total expenditure of Rp 699.1 trillion and revenue of 
Rp 659.1 trillion to come around to at least 70 percent each. He also said 
there would no problem in financing any deficit occurring, particularly through 
bond issuances. 

The Finance Ministry will be holding its last bond auction Tuesday, and will 
continue holding bond swaps until the end of the year to reduce payment costs 
of issued bonds. Sri Mulyani said the government was considering offering 
another batch of global bonds next year. 

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Joyo Indonesia News Service
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