GOVT URGED TO REDUCE STATE BUDGET DEFICIT

Jakarta, June 13 (ANTARA) - The Econit Advisory Group Saturday called on the government to reduce the deficit in the state budget to allow the economy to grow at a safe pace.

"As long as the budget deficit continues to expand, the economy will grow unfavorably," Econit Executive Director Hendri Saparini said.

In the draft 2009 state budget a deficit was set at Rp51 trillion but later was raised to Rp137 trillion, prompting the government to seek loans and issue bonds to offset the deficit, he said.

The government must make every effort to prevent the budget deficit from soaring for fear it would not only add to state burden but also lead to non-essential use of state budget funds, he said.

"The increase in the budget deficit will only create a chance for money politics at a high level. Therefore, the government must try to slash it," he said.

The smaller budget deficit the better the economy would perform, he said adding if need be, the government should eliminate a deficit in the state budget.

If Indonesia developed into a strong country it would have strong bargaining position abroad, the lecturer of the Bandung-based Institute of Technology (ITB) said.

The government has set a deficit in the 2010 state budget at 1.3 percent.

But Finance Minister Sri Mulyani Indrawati said the recent rise in global crude prices might raise the 2010 budget deficit to 1.6-1.7 percent of the gross domestic product.

If the assumed oil prices in 2010 hit a level of US$70 a barrel, the state budget deficit would increase accordingly, she said at a working meeting with the House Budgetary Committee here on Thursday.

"If the global crude prices hit US$70 a barrel the 2010 posture will be very much different from that of the early fiscal policy in which the assumed oil prices were set at US$45 a barrel. If global crude prices reach US$70 a barrel the budget deficit may increase to up to 1.6-1.7 percent," she said.

The rise in the budget deficit would be the result of rising fuel oil subsidy, she said.