Government Reaches Agreement With IMF
3 November 2003 10:41 WIB
In a written speech issued by the Ministry of Finance’s Information Bureau, Prijadi stated that cooperation with the IMF has proceeded as planned. “No difference of opinion exists between us”, he stated.
According to the Minister, the Indonesian Ggovernment has agreed that there would be an increase in the budget deficit to 6 percent of GDP from the 3.7 percent agreed by Parliament.
To settle this problem, the Indonesian Government will take steps as necessary to return the deficit to 3.7 percent of GDP, as previously planned. “We’ve designed policies as part of the fiscal adjustment package,” Prijadi said.
According to the Minister, the suggested package will be focused on increasing the income and expending role. In its application, the attempts will be maintained to minimize the risks of bad effects.
Prijadi said that the package consists of five policy measures. Among the policies are plans to maximize the tax base for certain items and reduce subsidies for oil and electricity products. It was noted that the price of gasoline in Indonesia is 40 percent lower than in the world market and the price of kerosene is 16 percent lower. Also, Prijadi said that the Government will utilize reserves arising out of efficient decentralization. It will allocate the reserves to income-starved regions and local governments as efficiently as possible.
Prijadi said that the Government plans to rationalize budget expenditure on development projects. The projects will be prioritized towards financing community services such as education, health, social security and infrastructure development. Prijadi also brought up matters regarding transferring 31 percent of local income. Here, he expected the regions to receive extra income.
Prijadi also said that steps have been carried out to guarantee the privatization of assets controlled by the Indonesian Bank Restructuring Agency (IBRA). “We’ve talked with department of privatization,” he said. Therefore, he added, the selling of the Government’s shares in Bank Central Asia (BCA) and Niaga Bank is ready to commence.
Prijadi realized the necessity for the Indonesian government to meet its obligations to the Paris Club, as the Paris Club has become the key to the Indonesian economy. “We realize our obligations under our agreement. Hence, we expect to maintain the program that we established with the IMF,” he said.
Regarding CGI’s finance, Prijadi said that the Government requires massive foreign financing to cover the large budget deficit. “We will increase Government income and lessen expenditure to compensate for the higher expenses resulting from the weakening rupiah and increasing interest rates,” he said.
