Legislators approved Thursday a “responsive” state budget for 2009 that provides room for the government to adjust to the impact of the global financial crisis.
In Article 23 of the budget, the government, under certain conditions, will be allowed to allocate new spending not stated in the budget, or shift spending allocations between programs or government agencies to protect the economy.
The government is also authorized to save spending while maintaining priority programs such as education.
If the government is in dire need of financing, it will be allowed to withdraw standby loans from bilateral or multilateral creditors and issue bonds of a higher value than stipulated in the budget.
However, such measures will only be allowed in “emergency” situations, including if economic growth falls 1 percent below the targeted 6 percent and if other macroeconomic indicators fall 10 percent short of their expected values.
Other emergency conditions include a rush on banks, indicated by a sudden drop in banks’ third-party funds, and a rise in bond yields by 300 basis points, or 3 percent, in a single month.
The lack of offers two times running for government benchmark bonds will also be considered an emergency.
“The article allows the government to take steps (to save the economy) without violating regulations,” said Finance Minister Sri Mulyani Indrawati after the plenary session.
“The risk of the economy growing less than 6 percent is very real. The two main indicators can be seen in the oil price and the currency.”
World oil prices now hover just above US$60 per barrel, a huge drop from the record $147 in July. The rupiah now stands at 10,675 per dollar, compared to about 9,200 in early 2008.
The Indonesian Democratic Party of Struggle’s (PDI-P) House faction said economic growth of 6 percent was far too optimistic.
“The figure of 6 percent is an example of overoptimism with no consideration of the government’s poor fiscal management,” said Nursyirwan Soejono when delivering the party’s final assessment on the budget.
He said that the government had spent only 35.4 percent of its budget in the first half of 2008, thus failing to truly stimulate the economy.
Mulyani said the government had asked for Rp 10 trillion ($936.77 million) to cushion the real sector from the turmoil in the financial sector.
“If the real sector is pressured by the (depreciating) currency or other prices, it may need room to breathe. The fund is there, which we’ll see selectively,” she said, without elaborating which sectors might be hit in 2009.
The fuel subsidy was set at Rp 103 trillion for 2009, far lower than the Rp 126.86 trillion provided in the 2008 budget. Mulyani said the amount was the maximum allocation for the subsidy, hinting the government might take measures stipulated in Article 23 if oil prices soared.
The government has maintained an expansive budget overall, despite the looming global financial crisis. Spending will reach Rp 1,037.1 trillion, the first time it has gone beyond
Rp 1,000 trillion. State revenue has been set at Rp 985.7 trillion.
|
BUDGET ASSUMPTIONS
|
| Indicators |
2008 Budget
|
2009 Budget
|
| Growth (%) |
6.4% |
6.0% |
| Inflation |
6.5% |
6.2% |
| BI Rate |
7.5% |
7.5% |
| Exchange Rate (Rp/$) |
9,100 |
9,400 |
| Oil Price ($ per barrel) |
95 |
80 |
| Oil Output (barrel per day) |
927,00 |
96,000 |
| Source: House of Representative |
