2008 Budget to Spur Growth

President Susilo Bambang Yudhoyono announced a budget for next year that will push funds into infrastructure development.

The government is targeting growth of 6.8% next year, up from its projected 6.3% this year, on a deficit of 1.7% of gross domestic product, Dr. Yudhoyono announced Thursday (16/8/07) in his annual state-of-the-nation speech to mark Independence Day.

The deficit will be used to fund plans to boost government capital spending to Rp101.5 trillion ($10.77 billion) next year, 48.6% higher than this year, to pay for much-needed infrastructure projects, Dow Jones Newswires reported.

Analysts called the budget ambitious and praised the decision to spend more money on infrastructure. They said a deficit of 1.5% to 1.8% of GDP is acceptable.

Separately, Energy and Mineral Resources Minister Purnomo Yusgiantoro promised that there would be no fuel price rises next year, stating that the lower fuel subsidy figure in next year’s budget of Rp46.7 trillion ($4.9 billion), down from Rp56.4 trillion this year, would be achieved by savings on kerosene subsidies as the transfer to gas for cooking fuel proceeded.

The Public Works Ministry will get Rp35.6 trillion for the next fiscal year - a 41% jump over its current allocation, with Rp18.6 trillion to go towards new road networks and improvements to existing ones, The Straits Times reported.

Education will get funding of Rp48.3 trillion, more than twice its 2005 budget, while the Health Ministry's budget will almost triple since 2005 to Rp18.8 trillion.

The Jakarta Stock Exchange continued to suffer from global concern over US subprime mortgages, with the composite index closing 5.9% down Thursday before the Independence Day.

The Jakarta Stock Exchange composite index closed at 1,908. For the week, the index plunged 13.5%.

Bank Indonesia Governor Burhanuddin Abdullah told reporters Thursday the central bank has intervened in the local foreign exchange market to support the rupiah "and will continue to be in the market." Abdullah didn't reveal the size or the timing of the intervention, the Associated Press reported.

In other news, the Economic Partnership Agreement with Japan was to be signed on Monday during the visit of Japanese Prime Minister Shinzo Abe.

Among deals to be signed during the visit, oil and gas firm Pertamina will sign an agreement to build a $1.2 billion liquefied natural gas (LNG) plant on Sulawesi with Japan's Mitsubishi Corp.

The plant will produce 2 million tons of LNG a year, with natural gas supplies coming from the Matindok and Senoro fields, operated by PT Medco Energi Internasional. The fields have combined reserves of around 2 trillion cubic feet. Mitsubishi has 51%, Pertamina 29% and Medco 20% in the LNG plant.
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