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By Elizabeth Pisani
588 words
7 January 1991
Reuters News
(c) 1991 Reuters Limited

JAKARTA, Jan 7, Reuter - Indonesia's budget for the year to March 1992, the eve of general elections, spends money where it is most needed and keeps plenty in reserve for pre-election sweeteners under the guise of fighting inflation, analysts said.

President Suharto announced plans on Monday to spend 50,555 billion rupiah (26.6 billion dollars) in 1991-92, 18 per cent up on the current fiscal year, much of it on basic development and infrastructure that would spread money to poor rural areas.

The budget uses a price of 19 dollars a barrel for the oil and gas exports that make up more than a third of domestic income. With war looming in the Gulf real prices would likely be much higher, economists said.

"That's about as low an oil price as they could have got away with," one economist said. Under Indonesia's balanced budget law, the less Jakarta predicted it would earn, the less it would be obliged to spend, he said.

"By keeping budget spending low, Suharto will have plenty in hand for pre-election spending," another economist said.

Suharto said in his speech to parliament that as oil prices soared above the 16.50 dollars a barrel budgeted this year, there had been pressure to increase civil service and military salaries.

Salaries could not be raised because funds were short and were needed to keep up the momentum of development, he said.

"Because Jakarta's still paranoid about inflation, he means," a private economist said. Raising salaries would have pumped money back into the urban economies where pressure on prices is highest, he said.

"But it will be very nice to be able to put up salaries by 30 per cent next year (1992-93) right before elections," he said. Any inflationary pressure would not be seen until after the elections due in the second quarter of 1992, he said.

Economists applauded the budget for spending where it was most needed, thus limiting inflationary forces.

Apart from overseas debt payments that ate nearly half of regular expenditure, the lion's share of the money was spent on roads, ports, telecommunications and power. Supply bottlenecks in these areas in the past have sent prices up.

"It's not the expansionary budget I feared. And the spending is in (remote) places where the speculative pressure on things like land and cement is less," a development economist said.

Development spending jumped 23 per cent to 20,000 billion rupiah (10.5 billion dollars) and there was a 40 per cent rise in the amount earmarked for small-scale rural development such as school building and agriculture.

"Elections here I come," a political analyst said, commenting on 69-year-old Suharto's 23rd development budget.

The president, who is due to end his fifth five-year term in 1993, played down contentious points in his budget speech in contrast to last year when he complained about the growing gap between rich and poor, the analyst said.

"That was a real can of worms," one diplomat said. The army and senior civilian leaders jumped on the issue as a way to criticise policies that protect the well-connected.

Suharto defended his government's emphasis on economic development. "From the very outset we realised that equitable distribution without growth will only mean sharing poverty," he said.

"It is precisely heightened prosperity that we will eventually spread more equitably to the whole population."


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