IMF, govt reach agreement on difficult fiscal issue<\/p>\n
JAKARTA (JP): The International Monetary Fund told Indonesia's
\nmain international donors, who gathered here on Monday for a two-
\nday meeting, it had reached a broad agreement with the government
\non resolving the country's crucial fiscal deficit problem.<\/p>\n
\"We are pleased to say that progress is being made in
\naddressing the fiscal problem for 2001,\" the IMF said in a
\nstatement at the Consultative Group on Indonesia (CGI) interim
\nmeeting at the Ministry of Finance.<\/p>\n
\"The (IMF) mission has reached agreement on the broad areas
\nwhere fiscal measures can be taken. However, given the size of
\nthe problem, bold initiatives are needed, and these will take
\nsome time to be fully formulated,\" the IMF said.<\/p>\n
The IMF said progress was also made in other areas of the
\ncountry's economic reform program, adding that it was confident
\nthe CGI donors would maintain their financial support of the
\ncountry.<\/p>\n
CGI groups Indonesia's traditional multilateral and bilateral
\nlenders, of which the largest are the World Bank, the Asian
\nDevelopment Bank and Japan.<\/p>\n
Experts said the IMF's endorsement was crucial for the country
\nto maintain the financial support of the CGI donors.<\/p>\n
A special mission from the IMF arrived in Jakarta early last
\nweek for a two-week review of the country's economic reform
\nprogram, and to examine the latest economic conditions in the
\ncountry.<\/p>\n
The IMF and government officials said the main focus of the
\nreview was finding a resolution to the country's larger-than-
\nprojected 2001 state budget deficit.<\/p>\n
The CGI donors pledged last October in Tokyo some US$4.8
\nbillion to help finance the current state budget deficit. There
\nwas speculation the donors would delay the disbursement of the
\npledged loans if the government failed to reach an agreement with
\nthe IMF on this issue.<\/p>\n
The interim CGI meeting is a warm-up for the group's meeting
\nin October or November, possibly in Yogyakarta, to decide on the
\namount of financial support they will provide Indonesia for its
\n2002 state budget.<\/p>\n
Attending the meeting on Monday were local representatives of
\nthe CGI donors, visiting IMF deputy director for the Asia Pacific
\nAnoop Singh and senior government ministers, including
\nCoordinating Minister for Social, Political and Security Affairs
\nSusilo Bambang Yudhoyono, who briefed the donors on the country's
\ncurrent political and security conditions.<\/p>\n
The government initially projected a state budget deficit of
\n3.7 percent of gross domestic product (GDP). But due to the
\nweakening of the rupiah and rising domestic interest rates, the
\nIMF and the government said the deficit could widen to 6 percent
\nof GDP unless corrective measures were taken immediately.<\/p>\n
The IMF has said such a widening of the budget deficit could
\nnot be allowed because it could further weaken market confidence
\ngiven the concerns over fiscal sustainability. It also said such
\na massive deficit would cause serious inflationary pressure.<\/p>\n
The government said earlier it was considering five measures
\nto maintain the deficit at 3.7 percent of GDP. These measures
\nincluded increasing tax revenue and cutting spending.<\/p>\n
The government plans to hold immediate discussions with the
\nHouse of Representatives on the revised state budget.<\/p>\n
Coordinating Minister for the Economy Rizal Ramli told the
\ndonors the government expected the House to approve the revised
\nbudget in the middle of May.<\/p>\n
\"The IMF has agreed on the changes to the budget assumptions,\"
\nRizal later told reporters.<\/p>\n
In the preliminary 2001 budget revisions announced over the
\nweekend, the GDP growth forecast for 2001 was cut to between 3.25
\npercent and 3.75 percent from 5 percent, and the inflation
\nforecast increased to between 9 percent and 9.5 percent from 7.2
\npercent.<\/p>\n
Economic growth was 4.8 percent last year, up from zero in
\n1999 and a contraction of almost 14 percent at the peak of the
\neconomic crisis in 1998.<\/p>\n
The average interest rate (the central bank benchmark rate)
\nwas revised to 15 percent from 11.5 percent, and the average
\nrupiah exchange rate was revised to 9,600 against the dollar from
\n7,800.<\/p>\n
But the government held steady on the forecast budget deficit
\nof 3.7 percent of GDP, a target it proposes to meet by sharply
\nincreasing tax revenue and cutting expenditures.<\/p>\n
The IMF said the special mission would return to Jakarta to
\nsign a new agreement on reform measures following the House's
\napproval of the budget revisions. Once this agreement is signed,
\nthe IMF will disburse its third $400 million loan tranche to the
\ncountry. The tranche was scheduled to be released late last year.<\/p>\n
The IMF statement said the new objective of the government was
\nto deliver at least 3 percent economic growth this year, \"which
\nis still an ambitious target in light of weaknesses in the world
\neconomic outlook, and the recent slowing in non-oil exports\".<\/p>\n
The government initially projected economic growth of about 5
\npercent this year.<\/p>\n
\"The policy framework under consideration for the 2001 program
\nalso aims at containing 12-month inflation to the single digit
\nrange by the end of the year, and maintaining Bank Indonesia's
\ngross foreign exchange reserves at their relatively comfortable
\nlevel close to about $29 billion,\" the IMF said.<\/p>\n
Minister of Finance Prijadi Praptosuhardjo said the government
\nwould accelerate the implementation of the reform program agreed
\nto with the IMF.<\/p>\n
\"We are fully aware that we will have to live up to our side
\nof the agreement, and therefore we are keen to keep our program
\nwith the IMF on track,\" Prijadi said. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/imf-govt-reach-agreement-on-difficult-fiscal-issue-1447893297",
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