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Spending has quickened, 50% of budget spent JAKARTA - Indonesia's government has accelerated its spending on public work projects needed to spur growth in Southeast Asia's biggest economy. The government has spent "slightly above'' 50 percent of this year's budget as of early September, Finance Minister Sri Mulyani Indrawati said today. The government plans to spend 689.8 trillion rupiah ($75 billion) in 2006.

Indonesia needs to boost spending after a doubling of fuel prices and a surge in borrowing costs slowed consumer demand in Asia's third-most populated nation. Growth in the $276 billion economy may slow to 5.2 percent this year from 5.6 percent in 2005, the International Monetary Fund said yesterday. "We are starting the disbursement very quickly, disbursement is 50 percent, which is healthy,'' Sri Mulyani said in an interview on the sidelines of the International Monetary Fund and World Bank meetings in Singapore. "We are applying a good procurement policy. There is an indication that we are going to save some budget money.''

The government, which rolled over 15 trillion rupiah from last year's budget, failed to keep its promise to spend the amount in the first quarter because of bureaucratic hurdles, Coordinating Minister for the Economy Boediono said in April. The money given by the central government meant for infrastructure projects have been invested in central bank's bills, the Jakarta Post reported on June 28.

Unachievable target

"I don't expect them to fully disburse by the end of the year,'' said Anton Gunawan, chief economist for Indonesia at Citigroup Inc in Jakarta. The government's 5.8 percent economic growth target for this year "won't be achieved and government spending is one part of the reason.''

Since coming to power in 2004 President Susilo Bambang Yudhoyono's government has failed to meet his pledge to cut poverty by half, keep prices in check and add jobs. Indonesia's jobless rate rose to 10.4 percent in February from 10.3 percent a year earlier even though its economy expanded at the fastest pace in nine years in 2005. The government aims to more than halve the unemployment rate to 5.1 percent by 2009.

"My concern is that economic growth is not high enough to boost employment,'' said Winang Budoyo, an economist at PT Bank Lippo in Jakarta. ``Private consumption is also still low.''

Auto sales

The central bank raised its key interest rate six times in the five months to December to help lift the rupiah from a four- year low in August and stem inflation after the government more than doubled fuel prices in October. Indonesian auto sales plunged 50 percent in the first seven months of 2006 as costs rose forcing consumers to defer purchases. Most Indonesian borrow to buy vehicles.

Indonesia may offer as much as 500 trillion rupiah ($54.7 billion) of infrastructure projects, including roads, railway and power plants, to investors in three to four years, Vice President Jusuf Kalla said today in Jakarta. The government is trying to lower costs by revamping its procurement process. The Finance Ministry expects to save as much as 30 percent by improving efficiency by switching to the Internet for buying goods, the finance minister said on its Web site.



Posted in Economy @ 15 September 2006 11:57 CET by Jeroen · 'Blog' RSS feed · permalink






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