Govt economic policies<\/p>\n
The Jakarta Post's comment about our country's problems and
\nthe government's economic team's performance in an editorial
\ntitled Bitter medicine on May 17, contains a number of factual
\nerrors.<\/p>\n
This economic team shares the deep concern of the Post about
\nthe consequences of a weakening currency. Since the current
\nCabinet took office, the economic team has been working hard to
\nimplement policies to strengthen the economy and the rupiah. We
\nhave been successful in a number of areas, as acknowledged by our
\npartners.<\/p>\n
In an important sense, the depreciation of the rupiah is at
\nleast in part a "monetary problem". Bank Indonesia, not the
\ngovernment, was given the responsibility by the current Central
\nBank Law to maintain the value of the rupiah. If monetary growth
\nis too rapid, one will see the type of depreciation that we have
\nseen over the past 18 months. As Ross McLeod of the Indonesia
\nProject at the Australian University in Canberra pointed out on
\nyour editorial page "if inflation and depreciation of the
\ncurrency get out of hand, the Central Bank must bear the blame".
\nAnd the fact is the Central Bank Law provides one single
\nobjective for Bank Indonesia, i.e. maintaining the value of the
\nrupiah.<\/p>\n
The economic team supports the central bank's efforts to
\ntighten the monetary policy, lower inflation and strengthen the
\nrupiah. Wherever blame lies for our current predicament, there
\nare a number of tough decisions that must be made. For instance
\nthe weak rupiah and high interest rates that are needed to
\naddress them have completely undermined the 2001 budget as passed
\nby the House of Representatives. Thus we now project that without
\ndramatic adjustments to our policies, the budget deficit will
\nballoon from 3.7 percent to 6 percent of Gross Domestic Product.<\/p>\n
Since such a high deficit cannot be readily financed without
\nfueling further inflation or forcing interest rates even higher,
\ndifficult times demand that hard choices be made. It is for this
\nreason that the government is proposing a series of tough
\nmeasures to the House. These will include reducing the burden of
\nsubsidies on the budget, an increase in the value-added tax and a
\nreduction in development expenditures.<\/p>\n
The House will have to make sure that it too can make hard
\nchoices. The nation cannot afford to ignore the budgetary
\nproblems in the hopes that it will somehow go away. Failing to
\nact now will only further weaken the rupiah and cause further
\nsuffering for all Indonesians.<\/p>\n
I would like to take exception to the short shrift your
\neditorial gives to the accomplishments of the people of Indonesia
\nlast year. We should all be proud that despite the problems in
\nthe country last year, the economy grew at 4.8 percent and
\ncontinued to grow at 4 percent into the first quarter of this
\nyear, driven by high levels of non-oil and gas exports, higher
\nthan precrisis levels. As stated by Coordinating Minister for the
\nEconomy Rizal Ramli when he took office in August 2000, his
\npriority is first of all to push exports. That we now have the
\nbeginnings of a recovery, as indicated by the increased use of
\nelectricity and cement and increases in car production and sales
\nof motorbikes, is in part due to the diligence of a well-
\ncoordinated economic team.<\/p>\n
The economic team is now working to implement a comprehensive
\nset of economic policies that will improve the productivity of
\nIndonesian capital and labor so that our products are competitive
\nin world markets irrespective of the value of the rupiah.<\/p>\n
But economic policies do not work in a vacuum. It will take
\nmore than good economic policy to strengthen the rupiah. Without
\nsome sort of solution to our political problems, there is not
\nmuch that an economic policy can accomplish.<\/p>\n
KOMARA DJAJA<\/p>\n
Deputy Macroeconomics and Finance<\/p>\n
The Office of the Coordinating Minister for<\/p>\n
Economic Affairs<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/govt-economic-policies-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }