M

ore bad economic news has clouded the campaign for the July 9 presidential election, two weeks before the campaign period ends.

That is not because of the shocking statement by presidential candidate Prabowo Subianto last Sunday that the state had lost Rp 7.2 quadrillion due to corruption and inefficiency.

Almost all analysts, ministers and former ministers immediately rejected Prabowo'€™s figures as simply groundless, irrational and completely wrong even though he claimed that the number originated from an official statement by Corruption Eradication Commission (KPK) chairman Abraham Samad.

Samad himself denied Prabowo'€™s statement, asserting that the presidential candidate grossly misquoted him out of context and not from the right perspective.

Prabowo highlighted the huge state losses during a televised debate between him and rival Joko '€œJokowi'€ Widodo on Sunday night, which focused on economic issues. Prabowo said it would be quite easy for him, if elected president, to implement all the grand development programs he had promised because he would simply focus on slashing state budget losses to secure more funds.

But then again, even though the alleged state losses were not as huge as Prabowo asserted in his campaign rhetoric, many things seemed to worsen in the economic sector, especially in the monetary and fiscal outlook.

The latest data shows that Indonesia'€™s debt service ratio (against export revenues) increased to 46.3 percent in the first quarter from 36.8 percent in the same period last year, much higher than the 30 percent deemed the maximum for a safe level.

Meanwhile, selling pressure pushed down the rupiah exchange rate to as low as Rp 12,027 per US dollar at one time on Wednesday, amid concerns over the country'€™s trade balance and current-account deficit due to the sharp upward trend in international oil prices caused by escalating tension in Iraq.

Concerns have also been growing over the significant increase in the private sector'€™s foreign debts as a default could adversely affect the financial sector'€™s stability. Bank Indonesia (BI) data as of Tuesday revealed that the private sector'€™s foreign debts rose by almost 13 percent year-on-year to $145.63 billion as of April.

Even though the latest private sector debt position is not yet dangerous, BI will soon issue new regulations to check foreign borrowing by the private sector. According to the central bank, non-bank companies accounted for 82 percent of the total private sector'€™s foreign debts. National enterprises accounted for $38.05 billion and Indonesia-foreign joint ventures for $42.76 billion.

Further bad news from the fiscal sector should worry the new government that will take over in October after the government and House of Representatives agreed on Wednesday to carry over Rp 50 trillion in energy subsidies this year to the 2015 state budget.

The government-House agreement on passing over the fiscal burden to the new government was reached at a plenary session that approved amendments to the 2014 state budget, made necessary by the lower economic growth estimate and consequently smaller tax revenues.

The energy (fuel, gas and electricity) subsidies for the current fiscal year are estimated to increase by 24 percent to
Rp 350.3 trillion due to rising oil prices, higher consumption and rupiah depreciation. But Rp 50 trillion of this subsidy will be carried over to the next state budget.

The rupiah rate heavily influences the costs of fuel because Indonesia now depends on imports for almost 60 percent of its demand of about 1.5 million barrels a day.

The amended budget for 2014 cut down spending by Rp 43 trillion, derived mostly from capital expenditures. Despite this cut, total spending will still increase from the Rp 1.842 quadrillion set in the original budget to Rp 1.876 quadrillion or 2.4 percent of gross domestic product (GDP) due to the 24 percent rise in energy subsidies.

The budget amendments also slightly changed macro assumptions for the current year, with gross domestic growth set at 5.5 percent, inflation at 5.3 percent, the average rupiah rate at Rp 11,600 to the dollar, the short-term interest rate at 6 percent and the average oil price at $105/barrel.

Finance Minister Chatib Basri therefore warned that whoever won the upcoming presidential election would not have many policy options, unless he slashed energy subsidies.

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In a shocking revelation of more details on the dismissal of Prabowo Subianto from the military in 1998, former military commander Wiranto asserted Thursday that Prabowo had been discharged for ordering the abduction of pro-democracy activists between late 1997 and March 1998.

The confirmation could scupper Prabowo'€™s presidential hopes as many did not question the credibility of the information even though Wiranto is a member of the campaign team for Prabowo'€™s rival, Joko '€œJokowi'€ Widodo.

Wiranto, who was Prabowo'€™s superior at that time, said military leaders had not ordered the abductions, emphasizing that the abductions were an initiative taken by officers under the command of Prabowo, then head of the Army'€™s Strategic Reserve commander (Pangkostrad).

Prabowo'€™s supporters have long tried to play down his dismissal from the military, calling it a past incident that has no bearing on his suitability as a presidential candidate.

'€” Vincent Lingga