Boediono optimistic on economy<\/p>\n
Jerry Norton and Dean Yates, Reuters, Jakarta<\/p>\n
Indonesia's finance minister expressed optimism over the
\neconomy on Friday, insisting the government was delivering on
\npolicy and changing perceptions about how investors view the
\nworld's fourth most populous nation.<\/p>\n
In a rare interview, Boediono said the government did not want
\nto seek another debt rescheduling with the Paris Club of official
\ncreditors after securing a US$5.4 billion deal last week.<\/p>\n
But Indonesia would need close coordination with the IMF on
\neconomic policy when an existing $5 billion loan program with the
\nFund expires at the end of next year, Boediono added.<\/p>\n
Indonesia has struggled to rebuild its economy and banking
\nsector after being savaged by the Asian financial crisis in the
\nlate 1990s, which required an earlier bailout from the
\nInternational Monetary Fund and other foreign donors.<\/p>\n
\"I think everybody's reading is that we have been experiencing
\na turnaround in psychology, perceptions and climate in the past
\nfew months,\" said the soft-spoken Boediono, respected by donors
\nand foreign investors alike.<\/p>\n
\"We have been quite consistent in implementing what we say we
\nare doing in terms of economic recovery. I think bit by bit, the
\npublic and the market seems to be giving us their confidence.\"<\/p>\n
Indonesia's stock market has traded near two-year highs in
\nrecent weeks while the rupiah -- once one of the world's most
\nvolatile and unsteady currencies -- has appreciated around 10
\npercent against the U.S. dollar since the end of last year.<\/p>\n
Boediono said increased confidence was also evident among
\ncreditor nations at the Paris Club meeting on Indonesian debt
\nalthough all-night negotiations were involved.<\/p>\n
\"Right from the outset we sensed general support for our
\nprogram but of course because we requested extra\" it took some
\nlengthy talking.<\/p>\n
Analysts generally agree Indonesia got exceptionally good
\nterms. Creditors \"were quite comfortable with the way we were
\nimplementing our economic program,\" Boediono said.<\/p>\n
He said Indonesia's gross domestic product should grow at
\nleast four percent this year and five percent in 2003.<\/p>\n
While four percent this year is in line with the budget, the
\nAsian Development Bank has predicted growth of just three
\npercent. Growth in 2001 was 3.32 percent.<\/p>\n
Boediono was more optimistic than some analysts about consumer
\nspending, the critical engine of economic growth last year,
\ncontinuing strong until a recovery in export demand kicks in from
\na hoped-for U.S. and global economic recovery.<\/p>\n
\"I think for this year consumption spending will still be a
\nsignificant factor...I think the tapering off will come but it
\nmay not be until next year,\" he said.<\/p>\n
For the next several years, Boediono added, annual growth
\nshould be between five and six percent.<\/p>\n
That might not be optimal but should be enough to cope with
\ncritical challenges like keeping unemployment from mushrooming
\nand avoiding the creation of artificially high levels or
\n\"bubbles\" in the share and property markets, he said.<\/p>\n
Asked if the recent gains in Indonesian share prices and the
\nrupiah currency were justified by fundamentals, Boediono said:
\n\"Definitely yes. All our assets are underpriced\".<\/p>\n
While declining to specify a level he also said he personally
\nsaw room for further rupiah appreciation without any need for
\ntightening the country's monetary stance.<\/p>\n
Interest rates could move lower, Boediono said, toward 14
\npercent for benchmark Bank Indonesia three-month certificates
\n(SBIs), now over 16 percent.<\/p>\n
One factor that has cut some slack for Jakarta's financial
\nmarkets was last week's agreement by the Paris Club of official
\ncreditors to reschedule more of Indonesia's huge foreign debt,
\nthe third pact since the late 1990s.<\/p>\n
Boediono said the government did not want another.<\/p>\n
Indonesia is burdened with total foreign debt of some $140
\nbillion, around the same as annual GDP.<\/p>\n
\"Our desire is not to go back (to the Paris Club) but
\ncertainly of course it depends on our performance and the overall
\nsituation at the time,\" Boediono said.<\/p>\n
Asked how long Indonesia needed an IMF program, he said:<\/p>\n
\"Close coordination with them in terms of our economic policy
\nwill be needed beyond 2003\" when the current program expires. He
\ndeclined to be drawn on details.<\/p>\n
Boediono also said he did not see much impact from a likely
\ndowngrade by Standard and Poor's of Indonesia's sovereign credit
\nratings to \"selective default\" due to private debt affected by
\nthe Paris Club deal.<\/p>\n
S&P has said such a downgrade was imminent over Jakarta's
\nplans to reschedule $340 million in official debt owed to private
\ncreditors per a pledge to the Paris Club to seek comparable
\ntreatment from that sector.<\/p>\n
Private creditors were being contacted about that proposal now
\nbut a meeting of the London Club, the private creditor equivalent
\nof the Paris Club, on the issue may still be some months away,
\nBoediono said.<\/p>\n
The government is trying to move back toward the black by,
\namong other things, collecting billions it is owed by former bank
\nowners who got emergency loans in a largely failed attempt to
\nshore up the troubled sector at the height of the Asian financial
\ncrisis in the late 1990s.<\/p>\n
Boediono warned the bankers the government meant business in a
\nnew scheme being devised to collect the cash.<\/p>\n
\"It's backed by rather solid political support from within the
\ngovernment and the legislature. I think the most important thing
\nis this political resolve or political will, which was not there
\nbefore,\" Boediono said.<\/p>\n
\"We mean business when we say that we will give penalties.\"<\/p>\n
A higher recovery rate on the debts is seen as critical both
\nto satisfy the IMF and creditors and to help plug a budget
\ndeficit targeted at 2.5 percent of GDP this year.<\/p>\n
Boediono also played down concerns a delay in issuing the
\ncountry's first treasury bills, the proceeds of which will be
\nused to refinance bank recapitalisation bonds maturing this year,
\nwould hurt the budget.<\/p>\n
The T-bills auction could be conducted by July as parliament
\nwas expected to approve a sovereign securities law by then, he
\nsaid.<\/p>\n
The cash-strapped government would also end up posting a lower
\nactual budget deficit for last year than a targeted 54 trillion
\nrupiah ($5.74 billion) or 3.7 percent of GDP, Boediono added. He
\ngave no figures.<\/p>",
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"sponsor": "Okusi Associates",
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