Awaiting new IMF money<\/p>\n
The government and the International Monetary Fund (IMF) team
\nin Jakarta are scheduled to wrap up their review of the
\nIndonesian economic situation and the implementation of the
\nreform package this week, making way for the IMF board in
\nWashington to approve the country's next aid disbursement in the
\nfirst half of next month.<\/p>\n
Although both negotiating teams have said the discussions have
\nrun smoothly over the past 10 days, many politicians and some
\nanalysts have accused the IMF of promoting its own "secret"
\nagenda by deliberately delaying the US$1 billion disbursement,
\noriginally scheduled for this month.<\/p>\n
What many have not realized is that the current assessment,
\nwhich should have been a routine one, was made much more complex
\nby a change in circumstances. The macroeconomic strategy devised
\nin early April has been overtaken by events last month, including
\nthe replacement of the Soeharto administration by President B.J.
\nHabibie on May 21. The massive riots in Medan, Jakarta and
\nseveral other provincial cities which caused extensive damage to
\nbusinesses and distribution networks, along with the huge capital
\nflight and further fall in the rupiah's exchange rate have forced
\nthe redrawing of the country's macroeconomic targets and a
\nreadjustment of its reform programs.<\/p>\n
The targets of inflation, exchange rate, budget deficit and
\nother fiscal and monetary aggregates for the current fiscal year
\nhave to be revised.<\/p>\n
More importantly, new programs have to be devised to rebuild
\nthe distribution system, so that supplies of essential
\ncommodities are available at affordable prices. Social spending
\nneeds to be expanded to provide scholarships for children, basic
\nmedicines and health services for families and public works jobs
\nfor the unemployed. More concerted efforts are needed to quickly
\naddress the problems of the banking sector which have been
\nexacerbated by a steep rise in interest rates and the steady fall
\nof the rupiah.<\/p>\n
We have noticed that Cabinet ministers have been promising in
\nrecent weeks to subsidize everything from education, fertilizer
\nand small-business credits to rice, wheat flour, electricity and
\nmedicines, even as the rupiah continues to weaken.<\/p>\n
Reconciling these programs into a macroeconomic framework that
\npreserves stability and prevents hyperinflation is indeed a
\ndaunting and time-consuming task. The fear of hyperinflation, a
\nballooning budget deficit and continued social unrest must be
\naddressed within a framework of strict fiscal discipline.<\/p>\n
It is important and quite encouraging to note that the IMF has
\nbeen greatly impressed with the government's performance in
\nexecuting reform measures agreed to in mid-January and revised in
\nearly April. This is greatly commendable, given the previous
\nbacktrackings on the part of the Soeharto administration in
\nNovember, January and March. The IMF's flexibility in regard to
\nexpanded subsidy spendings reflects its understanding of the dire
\neconomic situation the nation is now facing and the good rapport
\nit now has with the government.<\/p>\n
Needless to say, the IMF's vote of confidence is a crucial
\ncomponent in the efforts to lead our economy out of the economic
\ncrisis. It is catalyst and opinion leader for all other donors to
\nthe $43 billion bailout fund to Indonesia.<\/p>\n
With IMF backing, we can rest assured that new aid from the
\nWorld Bank, the Asian Development Bank and other countries will
\nsoon flow into the country again. Such aid hopefully will
\naccelerate the process of reestablishing market confidence in the
\neconomy and reinvigorate the rupiah. A stable rupiah is a
\nprerequisite not only to economic reform but also to the overall
\npolitical reform which is now underway.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/awaiting-new-imf-money-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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