I

ndonesia's budget deficit in 2009 is forecast to increase as the country's economy grows more slowly than expected, reducing state revenues, according to senior officials at the Finance Ministry.

In a seminar on Tuesday, Ministry's director general of budget management Anny Ratnawati said the budget deficit would reach Rp 136.9 trillion, or 2.6 percent of the country's gross domestic product (GDP), higher than the previous forecast of Rp 129.5 trillion, or 2.5 percent.

The increased deficit results from lower state revenue alongside higher state expenditure, she said.

The figures may change when the government and the House of Representatives wrap up the revision to the 2009 state budget scheduled for next week. The budget deliberation was initially scheduled to be finished this week, but was delayed for various reasons.

Anggito Abimanyu, the Ministry's head of fiscal policy, said to a meeting of the House that adoption of a lower economic growth projection would change budget assumptions.

"Based on our latest exercise, a more realistic growth is 4.5 percent, down from 4.7 percent, due to the recent developments in the world."

While the deficit would be higher, Anggito remained optimistic the government would have no problem in financing the deficit.

"There will be additional financing, whether from abroad or domestic. There are also standby loans *that can be used in emergency circumstances*."

Finance Minister Sri Mulyani Indrawati Mulyani said earlier several multilateral agencies and countries had provided up to US$6 billion in standby loans for Indonesia.

Among the multilateral agencies are the World Bank and Asian Development Bank (ADB).

ADB also said Monday that it is "exploring a guarantee facility in support of bonds, loans and other debt instruments issued by the government of Indonesia", which will lower the cost of financing.

ADB as an institution has higher credit ratings than Indonesia, making it more trusted by investors.

Meanwhile, lawmaker Dradjad H. Wibowo said the budget deficit should be manageable enough to gain market confidence.

"In normal times, a 3 percent deficit is manageable. But in the current conditions, 1.5 percent is a reasonable level."