INDONESIA FACES 1ST DEFICIT SINCE '91 WITH CALLS FOR MORE DEREGULATION

INDONESIA FACES 1ST DEFICIT SINCE '91 WITH CALLS FOR MORE DEREGULATION

The government announced the nation's first monthly trade deficit in four years, prompting fears of economic overheating and calls for more deregulation.

Information Minister Harmoko said Indonesia's world trade in June resulted in a $204.9 million deficit, compared with a $400.7 million surplus in May and an $831.4 million surplus in June 1994.The trade surplus in the first half of 1995 fell, to $1.9 billion from $3.65 billion in January-June 1994, Trade Ministry figures showed.

But there was better news on inflation. Mr. Harmoko said the consumer price index rose only 0.32 percent in August, after rising 0.71 percent in July and 0.89 percent in August last year.

Year-on-year inflation in August was 8.8 percent, down from 9.37 percent in July and 8.64 percent in August 1994.

The trade deficit - the first recorded since a $937 million deficit in March 1991 - prompted ministers and economists to call for a more restrictive monetary policy and further deregulation to make the economy more competitive.

"The government and the central bank have been warning about the overheating economy but we have the figures now," Laksamana Sukardi, an economist for the private Advisory Group on Economic Industry and Trade, said.

President Suharto urged ministers at Wednesday's Cabinet meeting to boost exports and make further moves to curb inflation, Mr. Harmoko said.

Inflation is a delicate issue in multiethnic Indonesia - a member of the Organization of Petroleum Exporting Countries - where about 26 million of the country's 190 million people remain in poverty.

June exports were $3.77 billion, similar to May but imports rose, to $3.97 billion from $3.37 billion in May. Oil and gas exports fell, to $858.3 million from $935 million in May.

Hartarto, the coordinating minister for trade and industry, said imports had been high in recent months.

"Our imports are high, especially on basic and auxiliary goods because of new foreign investment. Imports of capital goods are needed to expand industry and for new industries," he said.

Sukardi, the economist, urged the government to reschedule some large industrial and infrastructure projects in the power, telecommunications and transport sectors.

"I think the government will have to re-phase these projects as the economy is overheating," he said, adding the government should accelerate privatization and deregulation.

"This time, the government is under pressure to sacrifice their political interests to save the economy," Sukardi said.

Chan Kok Peng, an economist for Smith New Court in Singapore, said deregulation was needed to boost exports and called the import growth ''alarming."

"Export growth has been very weak because of the collapse in oil prices, which softened below the budgeted price of $16.50 in June," he said.

Indonesia used an average oil price of $16.50 a barrel in compiling its 1995-96 (April-March) budget announced in January.

Industry Minister Tungky Ariwibowo said the government would continue to deregulate the economy, now growing at around 7 percent annually, to boost exports and to simplify procedures.

"We are never tired of deregulating our economy. It will continue, especially to simplify procedures and to improve the flow of good in ports," he said.