Parliament Approves 2007 Budget

JAKARTA ~ The national parliament approved this week the government’s 2007 budget after two months of debate, with a deficit for Southeast Asia’s largest economy clocking in at US$4.4 billion.

The Rp763.6-trillion ($83-billion) budget is up from an original Rp746.54 trillion initially proposed by the government, with the budget deficit expected to be some 1.1 percent of gross domestic product.

The government initially forecast a deficit of Rp33.1 trillion or 0.9 percent of GDP.

Lawmakers agreed to most of the government’s macroeconomic assumptions in its draft, except for crude oil. The average crude price assumption was lowered to $63 per barrel from the government’s assumption of $65, with average crude oil production seen at 1.05 million barrels per day.

Legislator Jhonny Allen Marbun said the cut in the oil price assumption was based on expectations that global oil demand would soften next year in line with slower economic growth.

Other assumptions included growth hitting 6.3 percent, full-year inflation at 6.5 percent and an average exchange rate at Rp9,300 to the dollar.

Among major expenditure items, lawmakers agreed to a fuel subsidy of Rp61.9 trillion, including Rp1.8 trillion for liquefied petroleum gas and an electricity subsidy of Rp28 trillion.

Finance Minister Sri Mulyani praised lawmakers for agreeing to the increased outlays for next year, saying it showed they recognized the need to keep the country’s growth momentum going in order to create more jobs.

“We will consistently implement our policies to boost the economy so that prospects for Indonesia in 2007 will be better,” she said.

For 2006, the government has forecast growth of 5.8 percent, below its initial forecast of 6.2 percent.

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