IMF Likely To Accept Bigger Indonesian Budget Deficit

JAKARTA (Nikkei)-The International Monetary Fund is likely to accept an Indonesian budget deficit for fiscal 1998 of about 3% of the gross domestic product, compared with the originally agreed 1%, IMF sources said Thursday.

The IMF will approve the larger budget deficit in its negotiations on reviewing the conditions of its aid package to the country.

The compromise is made to allow Indonesia to maintain subsidies on agricultural products and other basic necessities at current levels.

National Logistics Agency Chief Beddu Amang said the same day the government will maintain subsidies on imported farm products to prevent price rises. The IMF understood such assistance was still needed although the subsidy system will be scrapped in the future.

A senior official of the Mining and Energy Ministry said he obtained the understanding of the IMF that subsidies to the power sector could also continue for the time being.

These subsidies are certain to boost the country's budget deficit in the next fiscal term from the original forecast because the fiscal 1998 draft budget revised in January assumed the subsidy cutbacks.

In addition, the IMF and Jakarta are likely to change the exchange rate assumed in the current draft budget from 5,000 rupiah per dollar to about 6,000 rupiah a dollar.