Govt optimistic on rupiah value<\/p>\n
JAKARTA (JP): The latest economic reform package brokered by
\nthe International Monetary Fund (IMF) is expected to quickly
\nstrengthen the rupiah's exchange rate, according to an official
\ndocument published yesterday.<\/p>\n
The 20-point Supplementary Memorandum of Economic and
\nFinancial Policies -- worked out jointly by the government and
\nthe IMF -- does, however, predict soaring inflation and a
\ncontraction of the economy.<\/p>\n
The rupiah's value should strengthen rapidly in the second
\nquarter of 1998, it said. \"We expect that the exchange rate will
\neventually stabilize below Rp 6,000 to the dollar.\"<\/p>\n
Details of the package were released by Coordinating Minister
\nof Economy, Finance and Industry Ginandjar Kartasasmita two days
\nafter the completion of the talks with the IMF.<\/p>\n
The document, a revision to a 50-point Memorandum of
\nUnderstanding signed by President Soeharto in January, culminates
\nthree weeks of intensive negotiations with the IMF, which has
\norganized a US$43 billion rescue package for Indonesia.<\/p>\n
While noting a continued deterioration, it hoped that the
\neconomy would begin to recover in the second half of this year.<\/p>\n
Inflation could reach 45 percent in this calendar year, given
\nthat the consumer price index had already risen by 27 percent in
\nthe first quarter. But price increases have started to taper off,
\nand inflation in the 1998\/1999 fiscal year should slow down to
\nbetween 17 and 20 percent, it said.<\/p>\n
The economy is also predicted to contract by 5 percent in the
\ncalendar year 1998 and 4 percent in fiscal 1998\/1999.<\/p>\n
In a brief statement yesterday, Ginandjar cautioned against
\noveroptimism on inflation and growth projections. \"The degree of
\nuncertainty in our economy remains high. These assumptions could
\nstill change.\"<\/p>\n
Officials and analysts agree that restoring the rupiah's
\nexchange rate is a crucial precondition to any recovery. The
\nrupiah has plunged from Rp 2,400 to the dollar in July last year
\nto Rp 17,000 in January. On Thursday, it traded at about Rp
\n7,800.<\/p>\n
The government hopes to stabilize the rupiah's exchange rate
\nby tightening its monetary policy, specifically curtailing Bank
\nIndonesia liquidity credits to commercial banks through setting
\nhigh interest rates on Bank Indonesia promissory notes (SBIs).<\/p>\n
The latest economic reform package promises the enactment of
\nan antimonopoly law, a new bankruptcy law, the establishment of a
\nspecial bankruptcy court and the introduction of regulations for
\nthe winding up of companies, mergers and acquisitions.<\/p>\n
It also calls for an end to the palm oil export ban, replacing
\nit with a tax of not more than 40 percent.<\/p>\n
It outlines a program for privatization of state enterprises
\nand for accelerated restructuring of the battered banking sector.<\/p>\n
The package also provides a framework to resolve the $74
\nbillion in corporate foreign debt.<\/p>\n
The debt issue, despite its contribution to the crisis, was
\nnot specifically addressed in the January package, a factor that
\nled to the rupiah plunging even further in the days immediately
\nafter it was announced.<\/p>\n
The latest reform package revised some of the assumptions used
\nin calculating the government budget this fiscal year, which is
\nnow expected to register a deficit equal to 3.2 percent of the
\ngross domestic product.<\/p>\n
The package commits the government to phase out subsidies on
\nfood -- except for rice and soybeans -- and on medicines, energy
\nand fuels. It sets an October deadline for the termination of all
\nsubsidies, except for fuels. (rei\/emb)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-optimistic-on-rupiah-value-1447893297",
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