Bappenas Proposes State Debt be Increased
Wednesday, 30 April, 2008 | 17:32 WIB

TEMPO Interactive, Jakarta: The National Development Planning Board (Bappenas) has recommended three options for reducing pressure on the state budget, caused by high world oil prices that are approaching US$120 per barrel.

According to Bambang Prijambodo, the Bappenas director for macro planning, the first option is to cut down fuel subsidy by implementing smart cards, converting from kerosene to gas and economizing electrical consumption.

“This will help the subsidy burden,” he told Tempo in Jakarta.

In the revised 2008 state budget, the Indonesian crude oil price is assumed at US$ 95 per barrel.

The quota for subsided fuel consumption is 35.5 million kiloliters with total subsidies of Rp126 trillion, up from the previous subsidy of Rp46 trillion.

The increased fuel subsidies increase the deficit of the 2008 state budget from 1.7 percent to 2.1 percent against gross domestic product (GDP).

International and local loans, as well as issuing state promissory notes (SUNs), are ways of helping cover this deficit.

The second option is for the government to increase the deficit to beyond 2.1 percent.

As regulated in the state finance state decree, a deficit is allowed to be up to three percent of GDP.

“The government can find loans to cover the deficit,” said Bambang.

The third option, he continued, is to further reduce the budget allocation for ministries and government institutions by more than 10 percent.

Yesterday (29/4), world crude oil prices on the main market in New York closed at US$ 118.12 per barrel.
Under these conditions, the price of Indonesian crude oil is approaching US$ 104 per barrel.

It is estimated that the subsidy burden could leap up to Rp200 trillion.

Economists and entrepreneurs are suggesting the government increase fuel prices to save the budget.

However President Susilo Bambang Yudhoyono is still trying to find other alternatives.

The government will make a decision as regards increasing fuel prices in June.

Bambang added that Bappneas did not recommend the government increase fuel prices either.

“There are many things to be considered, including social and political aspects, besides the economic aspect,” he said.

“Increasing fuel priced will be the last option to take,” he added.

Finance minister Sri Mulyani Indrawati again stated that the 2008 state budget would be secure even if world oil prices keep increasing up to US$120.

Agus Surpiyanto | Ezther Lastania