Muklis Ali, Jakarta – Indonesia announced deep, wide-ranging spending cuts and delays in major projects on Tuesday to help cope with currency and share market upheavals.
Finance Minister Mar'ie Muhammad told a parliamentary commission that projects worth some 39 trillion rupiah ($13 billion) would be postponed, and projects worth 63 trillion rupiah would be reviewed.
The national budget would otherwise end up heavily in the red, he told the commission.
He said the government would slash spending on projects with high import content and those funded from overseas.
Development expenditure would be slashed by 3.28 trillion rupiah.
However, Mar'ie said foreign debt repayments would not be affected "and it may even be possible to make prepayments."
Indonesia is a major foreign debtor nation.
Social welfare and programmes to alleviate poverty also would not be affected, he said.
The move followed similar project deferrals and spending cuts recently announced by Malaysia in response to foreign exchange and share market turmoil which spread through southeast Asia.
"Even though there has been a considerable negative impact (from the currency crisis), we hope this event can be used as an opportunity to consolidate the national economy by implementing various structural adjustments," Mar'ie said.
"These structural adjustments are needed so that all sectors of our national economy are prepared to face economic globalisation, a development that is already well underway."
Projects postponed until the economy recovered included two oil refineries being constructed for state oil company Pertamina and 14 electricity generation projects, he said. The projects involved spending of $5.8 billion.
Nine more power projects worth $4.9 billion would be reviewed while 29 toll road projects would be postponed, Mar'ie said.
The planned $560 million Jakarta Tower, envisaged as one of the world's tallest, and a 95-km (60-mile) bridge linking Indonesia to Malaysia were also postponed.
Mar'ie said the 1997/98 budget would face a shortfall of 9.2 trillion rupiah unless steps were taken to cushion the effects of falling government tax revenues and an extra burden on the fuel subsidy programme caused by the slide in the rupiah.
The rupiah has fallen about 25 percent against the dollar since the start of the year.
The government said private firms would also be encouraged to rein in expansion, especially on programmes dependent on short-term overseas funding.
Sales taxes on non-essential luxury goods would be raised, and the government would attempt to boost non-oil exports, Mar'ie said.
Import duties on a number of raw materials and intermediate products will be slashed, he said.
The government would continue to pursue policy aimed at consolidation of the banking sector.
He said the belt-tightening was aimed at capping the current account deficit at three percent of gross domestic product (GDP) for the next two years.