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Indonesia slashes defence budget in wake of oil price hike
By Jon Grevatt
27 February 2008
Spiralling oil prices have forced the Indonesian government to reduce all ministerial budgets - including defence - by 15 per cent, Finance Minister Sri Mulyani announced on 26 February.
The government announced a Fiscal Year 2008 (FY08) defence budget of IDR36.4 trillion (USD3.9 billion) in January, a 10 per cent rise on the 2007 figure of IDR32.6 billion.
The government's retrenchment effort, however, could see the Southeast Asian country's defence budget fall to IDR30.6 trillion, or around 0.7 per cent of GDP.
In comments published by Indonesia's state-run media, Mulyani said that the decision was taken following the increase in the price of oil to a record USD100 per barrel, which in turn had increased government subsidies to the oil sector.