The Foreign Ministry and some LDP policymakers expressed opposition Wednesday to a government panel’s decision to cut Official Development Assistance in the fiscal 2002 budget by 10 percent from the initial fiscal 2001 budget.

Foreign Minister Makiko Tanaka is expected to voice her opposition to the Finance Ministry and relevant government officials after a key government panel on fiscal and economic policy agreed to the cuts Tuesday, a senior Foreign Ministry official said.

The Council on Economic and Fiscal Policy agreed on 10 percent cuts in ODA, public works projects and general policy expenditures as part of ceilings for budgetary requests by ministries and agencies for fiscal 2002.

While the panel agreed to the cuts, it called for allowing up to a 20 percent increase, to 2 trillion yen, in budget requests in seven strategic fields outlined under Prime Minister Junichiro Koizumi’s structural reform blueprint. This would in turn force drastic cuts in other areas.

The seven key areas are information technology, urban redevelopment, the environment, the aging population, revitalization of local communities, science and technology, and human resources development.

The Foreign Ministry is arguing that some ODA programs fall under these seven key areas, the official said.

“ODA-related projects are also included in the seven priority areas (which will be allocated larger budgets),” senior LDP lawmaker Muneo Suzuki said.

Meanwhile, policymakers of the ruling LDP met Wednesday and expressed similar concerns, with many participants describing the drastic across-the-board cuts as “unconvincing.”

Taro Aso, LDP Policy Research Council chairman, will relate the opposition to the central government by Friday, when the Cabinet is slated to endorse the framework for fiscal 2002 budgetary requests.

Some LDP members are also unhappy with the panel’s decision to cut 1 trillion yen from expenditures to special public corporations, while others called for an increase in personnel costs related to public security.

The initial ODA budget for the current fiscal year, which began April 1, is 1.02 trillion yen, down 3 percent from that for fiscal 2000.

The Foreign Ministry handles the biggest share of the ODA budget at nearly 55 percent, followed by the Finance Ministry at some 33 percent. The Cabinet Office, eight other ministries and two agencies also receive funds from the ODA budget.

In Tuesday’s meeting, the panel did not specify the amount of general expenditures, which cover spending on public works, social welfare, public servants’ salaries, ODA and other policy-related measures.

General expenditures stand at 48.7 trillion yen this fiscal year and the Finance Ministry wants to cut this by some 700 billion yen to around 48 trillion yen for fiscal 2002.

If realized, it would mark the first contractional budgetary ceilings since fiscal 1998, when then Prime Minister Ryutaro Hashimoto attempted fiscal and structural reform. The panel aims to slash public works spending — 10.4 trillion yen this fiscal year — by around 10 percent by eliminating wasteful projects and cutting back on the rest.

The panel also called for efforts to slow down spending on social welfare, for which 17.4 trillion yen has been set aside this year, although numerical targets were not discussed at the meeting.

According to government projections, rising medical costs for the elderly will help social welfare spending balloon by about 1 trillion yen in 2002. Ministries will be permitted to increase budgetary requests for the seven sectors by up to 20 percent, but after the varying requests’ merits are evaluated, the actual total increase will be limited to 10 percent.

The panel calls for earmarking 2 trillion yen for the seven priority areas when the 2002 budget is finalized at year’s end, while aiming to cut spending on other areas by as much as 5 trillion yen, according to Heizo Takenaka, minister in charge of economic and fiscal policy.

This will enable the government to reduce some 3 trillion yen from projections that it will need to issue bonds worth 33.3 trillion yen to meet fiscal 2002 expenditures, Takenaka said.

The guidelines reflect Koizumi’s fiscal reform pledge to keep annual issuance of government bonds under 30 trillion yen. Budget requests related to key areas will be allowed for submission until the end of September, while others are due Aug. 31, Takenaka said.

After receiving the requests, the Finance Ministry will draft a budget to be finalized by the end of the year.

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