Dion Bisara & Muhamad Al Azhari – Sluggish government spending is giving rise to fears that the country will fail to meet the projected 2009 growth target of 4.3 percent.

Herry Purnomo, director general of the treasury at the Ministry of Finance, on Tuesday said the budget deficit was running dramatically lower than expected as of the end of September.

"Deficit realization up to September 30 stood at Rp 33.23 trillion, compared with the targeted [deficit of] Rp 129.8 trillion [for 2009]," he said.

While a lower budget deficit is normally to be welcomed, it reflects sluggish government spending on projects intended to stimulate the economy, putting the country's growth target in jeopardy.

Government spending this year is targeted at Rp 1,000.84 trillion ($106 billion) under the 2009 budget revisions adopted in August, while total government receipts are projected at Rp 870.99 trillion.

Harry Azhar Azis, deputy chairman of the House of Representatives' budget committee, said he was concerned that the deficit would not even exceed 50 percent of the yearly target if the slow rate of spending continued.

"The good thing is that our debt stock can be reduced. But I'm more worried about projects that are financed by the deficit. As we do not apply a multi-year financing system, these projects could grind to a halt by the end of the year," he said. "This could disrupt the momentum of recovery, although I can't say by exactly how much as yet."

Juniman, an economist at PT Bank Internasional Indonesia, said the country was unlikely to experience a significant multiplier effect from government spending this year, although he said he expected the deficit to reach Rp 100 trillion.

"It's a bad habit, but as we know government spending usually only accelerates in the fourth quarter. At least Rp 100 trillion will likely be spent. But as this is below target, the multiplier effect will only become noticeable next year," he said.

The House approved a higher deficit of 2.4 percent of GDP in the revised budget, up from 1 percent in the original spending plan, partly to finance the government's Rp 73.3 trillion fiscal stimulus package.

Bambang Priambodo, director of macroeconomic planning at the National Development Planning Board (Bappenas), said the slow spending was an indicator of the problems affecting state institutions.

Meanwhile, the government has been doing well on the financing side, especially regarding proceeds from bond sales. At the end of September, the government had sold Rp 85.546 trillion worth of bonds, 86.19 percent of this year's target of Rp 99.256 trillion, Herry said.