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Govt can now spend more on key projects, says WB
With falling crude oil prices sparing the government from spending more on the fuel subsidy, the money saved should be spent on more productive agenda such as building infrastructure to stimulate the economy, the World Bank says
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ith falling crude oil prices sparing the government from spending more on the fuel subsidy, the money saved should be spent on more productive agenda such as building infrastructure to stimulate the economy, the World Bank says.
The World Bank, a major donor to Indonesia, also welcomed the latest cut in domestic fuel prices as reflecting world oil prices.
"This decision (to cut prices) is a reflection of what's happening on the world market... prices have collapsed in a very short period of time," Joachim von Amsberg, World Bank country director for Indonesia, said Monday.
"So all of a sudden, a very large subsidy in fuels in Indonesia disappeared. "I think that shift is welcome and we will ensure that in the future, the resources spent on very large fuel subsidies can be used for investment. That should be good for Indonesia and good for economic prospects."
His remarks underlined the government's vow to accelerate infrastructure development next year to stimulate the economy clouded by the global economic downturn. Such projects could also lead to more jobs at a time when the private sector is expected to cut output on slower demand, bringing about possible layoffs.
Public Works Minister Djoko Kirmanto says the government is looking to create 3 million new jobs next year through state-funded infrastructure projects. Up to Rp 34.9 trillion has been allocated for projects under this ministry alone.
Finance Minister Sri Mulyani Indrawati says the impact of the global slowdown on Indonesia's economy could likely peak in the first half of 2009. While the 2009 state budget projects growth of 6 percent, the government now expects the economy to grow between 4.5 and 5.5 percent -- still higher than most economists' predictions.
Against this backdrop, visiting World Bank managing director Juan Jose Daboub said in Monday's forum the bank would provide both financial and non-financial support for the government in protecting the poor and maintaining longer-term investment in infrastructure.
"We are contributing our resources and expertise to improving social protection, better budget execution, as well as sustained infrastructure and institutional reforms, including in the financial sector," Daboub said.
He also confirmed the bank was currently in talks with the government for a contingency fund of US$2 billion to help plug the state budget deficit.
"The finance minister will make an announcement early January," he said.
Daboub added that should the government need more money to plug the deficit, the World Bank would consider lending a hand.
"We will wait and see, should it take place," he said.
The government says it will issue fewer bonds to finance the deficit amid an adverse sentiment worldwide, and will instead rely more instead on loans, both from neighboring nations and multilateral organizations.
