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Indonesia's finances are expected to wrap up the year in good
shape, with the current account in surplus and the budget deficit
ending up within a slightly lower-than-expected range of between 1 and
1.1 percent of gross domestic product.
This was due to the likelihood of growth continuing to pick up during
2006's final quarter, said Finance Minister Sri Mulyani Indrawati, and
was despite the recent weakening of the U.S. dollar, which could affect
Indonesian exports.
"We are comfortable so far with the budget deficit. There are no
problems at all. We see the deficit at between 1 and 1.1 percent," she
told reporters Wednesday.
"The recent movements in the dollar are, from the budgetary
perspective, also manageable."
In its 2006 mid-year budget revisions, the government targeted a budget
deficit of Rp 39.9 trillion (US$4.4 billion), or 1.3 percent of GDP.
Sri Mulyani admitted that a number of problems had affected this year's
budget revenues and expenditures, but said that the budget was well on
track in the final quarter.
"There will be some envisaged spending that won't now take place. But
that's better than spending the money just for the sake of spending
it," she said.
"We're optimistic about income-tax revenues, as well as value-added-tax
revenues on domestically produced goods, although revenues from VAT on
imported goods may decline a bit."
Tax revenues -- at Rp 425 trillion -- make up the bulk of this year's
total Rp 659 trillion in budget receipts.
Mulyani explained that revenues from VAT on imported goods would
possibly miss their target due to the economic slowdown in the first
part of the year, and the shifting of growth from the manufacturing
sector to such other sectors as services, trade and agriculture --
which contained less imported components.
She was upbeat, however, that Indonesia's economic growth would
continue to pick up speed, thus leading also to increased government
revenues.
Growth rebounded to a revised 5.1 percent and 5.5 percent in 2006's
second and third quarters, respectively, from 4.6 percent in the first.
It is expected to come in at a full-year rate of about 5.8 percent --
slightly better than the 5.6 percent recorded in 2005 -- and further
increase to 6.3 percent in 2007.
"We'll watch how the momentum of growth plays out, and if we can
maintain the upward trend, then revenues will also improve next year,"
Mulyani said.
Meanwhile, concerning possible adverse impacts on Indonesia's finances
from the recent weakening of the U.S. dollar against the rupiah,
Mulyani suggested that all exporters, importers and real-sector players
should carefully recalculate their business-plan costs.
The dollar has come under pressure as a result of the U.S.'s twin trade
and current account deficits, resulting in a shift by investors from
dollar-based assets.
A stronger rupiah makes Indonesia's exports less competitive and
imports cheaper, thus affecting the country's trade and current account
balances. However, it also serves to reduce the government's burden in
servicing its foreign debt.
Data from the central bank shows Indonesia's current account surplus
standing at $4 billion as of the third quarter.
Under the 2006 budget revisions, the government has assumed a rupiah
exchange rate of Rp 9,300 per U.S. dollar. The rupiah was little
changed at Rp 9,065 per dollar on Wednesday.
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