Expectations high but Budiono no miracle worker, analysts say<\/p>\n
Urip Hudiono, The Jakarta Post, Jakarta<\/p>\n
Improving coordination among the economic ministries and the
\nmanagement of the state budget is what analysts say former
\nfinance minister Boediono must immediately do upon his return to
\ngovernment in order to put the economy on the right track again.<\/p>\n
\"There are two important things that Boediono -- or whoever
\nwill be appointed as finance or chief economics minister -- must
\nprioritize now,\" economist Kahlil Rowter of Mandiri Sekuritas
\ntold The Jakarta Post.<\/p>\n
\"The first is to better coordinate the government's fiscal
\npolicies with the central bank's monetary policies; the second is
\nto maintain stability in the country's financial sector -- in the
\nmutual funds market, for example -- which has more or less
\naffected investor confidence and caused volatility in the
\nrupiah.\"<\/p>\n
Kahlil explained that as Bank Indonesia (BI) was at present
\nmaintaining a tight monetary policy by hiking interest rates to
\ncope with the current rise in inflation, the government also
\nneeded to be contractionary in its fiscal policies.<\/p>\n
Although acknowledging the need for more government spending
\nto help spur economic growth, which has been slowing down due to
\nrising inflation and interest rates, Kahlil warned that an
\nexpansionary budget should only be pursued if this was in line
\nwith BI's policies.<\/p>\n
\"This year's unspent budget allocations should not be
\ndisbursed all at once within the first semester of next year in
\norder to avoid disrupting the macroeconomic stability that is
\ncurrently being rebuilt,\" he said.<\/p>\n
Standard Chartered Bank economist Fauzi Ichsan, however, said
\nthat it was increasing government spending that Boediono needed
\nto focus on for the sake of higher economic growth, as well as
\npushing ahead with reform, including more privatization.<\/p>\n
In a plenary session of the Indonesian Science Academy on
\nSaturday, Boediono presented a paper assessing the current
\neconomic situation, in which he underlined the importance of
\npolitical and economic harmony, as well as coherent policies
\nwithin the government's economic team, if macroeconomic stability
\nwas to be achieved.<\/p>\n
He also warned that macroeconomic stability should never be
\ntake for granted, and that prudent budgetary policies, including
\nreducing the deficit and debt stock, should always be pursued. It
\nwas also essential to press ahead with reform in the area of
\ngovernance.<\/p>\n
A former central bank deputy governor and National
\nDevelopment Planning Agency (Bappenas) chief, Boediono is
\nexpected to have no difficulty in working together with BI and
\nother state officials, as he did during his term as finance
\nminister under the previous government.<\/p>\n
Market analyst Dandossi Matram, however, said it was still too
\nearly to know what to expect of Boediono as his position in the
\nCabinet was still not clear.<\/p>\n
He said that the positive market reaction following President
\nSusilo's announcement that he had invited Boediono to join his
\nCabinet's economic team had more to due with the perception that
\nSusilo was on the right track in his Cabinet reshuffle plans to
\nimprove the economy, rather than the \"Boediono factor\" itself.<\/p>\n
\"The markets will still wait and see what really comes of the
\nreshuffle,\" he said, adding that Susilo's still vague reshuffle
\nannouncement was \"merely testing the market.\"<\/p>\n
Bank Negara Indonesia (BNI) analyst Ryan Kiryanto cautioned
\nthe public and the markets not to pin their hopes too high on
\nBoediono as a macroeconomic savior. \"Economic performance will
\ndepend on the cooperation and teamwork of the whole economics
\nteam, not Boediono alone.\"<\/p>",
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"sponsor": "Okusi Associates",
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