IMF, govt ease base money target<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The International Monetary Fund (IMF) and the government
\nagreed on targeting next year a base money growth of between 12
\npercent to 14 percent, easing down from this year's growth target
\nof 12.5 percent.<\/p>\n
Finance Minister Boediono said on Wednesday the new growth
\ntarget was added to the draft of the fourth Letter of Intent
\n(LoI) with the IMF.<\/p>\n
\"We will lower the base money supply, I think growth is set at
\nbetween 12 percent to 14 percent,\" he told reporters.<\/p>\n
The higher growth range reflects cautious optimism that
\npressure on the rupiah and inflation may fall next year.<\/p>\n
It also lends hope that Bank Indonesia will lower its interest
\nrates, a long awaited move by industries stifled with high
\nlending rates.<\/p>\n
Interest rates have been set tight to absorb liquidity in base
\nmoney supply that otherwise could be used to speculate against
\nthe rupiah or stoke inflation.<\/p>\n
Base money measures the stock of money in an economy including
\ncash and deposits in savings and checking accounts. Too much
\nmoney in relation to the output of goods tends to push interest
\nrate down.<\/p>\n
There has been growing calls for Bank Indonesia to lower
\ndomestic interest rate to help push economic growth and to ease
\nthe state budget burden in covering the coupon rate of government
\nbonds.<\/p>\n
The government and the IMF visiting mission agreed on Tuesday
\non a draft of the country's fourth LoI, which outlines the
\ngovernment economic targets and reform programs for next year.
\nThe draft of the LoI has yet to be unveiled to the public.<\/p>\n
The government has projected economic growth of 4 percent next
\nyear, compared to this year's estimate of 3.5 percent; and
\ninflation rate of 9 percent, compared to around 11 percent
\nexpected for this year.<\/p>\n
Bank Indonesia Deputy Governor Miranda Goeltom said base money
\nsupply as of October had reached Rp 117.4 trillion (some US$11.25
\nbillion). The central bank has targeted Rp 111 trillion.<\/p>\n
Miranda predicted base money growth may hit 17.8 percent for
\nthe whole of this year, also far above its 12.5 percent target.<\/p>\n
Elsewhere, Bank Indonesia one month promissory notes (SBI)
\nended flat at 17.59 percent from last week's rate at 17.58
\npercent.<\/p>\n
Rates have been hovering at these levels for the past six
\nweeks, as Bank Indonesia tries to absorb liquidity in the money
\nmarket.<\/p>\n
Other targets in the LoI draft included the revision of local
\nregulations, the IMF deemed as hurting regional economies.<\/p>\n
Director General for Fiscal Decentralization Machfud Sidik
\nsaid the IMF identified some 100 local regulations that were in
\nviolation of the regional autonomy laws.<\/p>\n
\"Since regional autonomy came in to effect, businessmen have
\nbegun to complain about the surge of regulations impeding their
\ninvestments,\" he was quoted as saying by Kompas.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/imf-govt-ease-base-money-target-1447893297",
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