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5/18/2006 5:29 AM
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Fiscal Policy Highlights and Macroeconomic Framework for the 2007 Draft Budget for Government of Indonesia


The Indonesian Finance Minister on May 14, 2006 presented the Fiscal Policy Highlights to the Indonesian Parliament that will serve as the basis for preparation of the Draft Budget for fiscal 2007. The fiscal strategy will again focus on two fundamental measures. First is to press forward with fiscal consolidation in order to ensure fiscal sustainability and second is to formulate a manageable budget financing strategy that will reduce the stock of government debt and the ratio of official debt to GDP. To achieve the key fiscal policy objectives in the 2007 Draft Budget, the government will pursue key policy actions in the areas of state revenues, state expenditures, and budget financing.

Concerning budget revenues, taxation policy in 2007 is aimed not only at boosting revenue collection, but also at providing a limited fiscal stimulus in support of higher quality of economic growth.   In the area of budget expenditures, central government spending allocations are aimed at maintaining the level of real incomes of active and retired civil servants and easing the burden of debt interest within the overall context of official debt management. With regard to budget financing, policy will be aimed primarily at covering the fiscal deficit, meeting debt amortization obligations and injecting government capital into state enterprises in order to accelerate the construction of infrastructure and thus promote stronger economic growth.

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