IMF urges Indonesia to ensure recovery does not falter<\/p>\n
WASHINGTON (Agencies): Indonesia must dispel political
\nuncertainty and intensify reforms if economic recovery is to take
\nhold, the International Monetary Fund (IMF) said on Monday.<\/p>\n
\"There are many risks in the near term, and achievement of
\n(economic) objectives is predicated on swift reduction of
\npolitical uncertainties and intensified program implementation,\"
\nthe IMF said in a press summery of its annual \"Article IV\" review
\nof Indonesia.<\/p>\n
The assessment closely tracked comments issued by the IMF on
\nSept. 14, when it approved a US$399 million installment from the
\n$5.0 billion loan program signed in February.<\/p>\n
As it did then, the IMF warned that market confidence is
\nfragile, and the renewed volatility and weakness in financial
\nmarkets threaten Indonesia's recovery.<\/p>\n
The IMF said private capital flows have yet to recover and
\nasset recovery and corporate debt restructuring have yet to reach
\na decisive stage.<\/p>\n
The IMF said there should be room for interest rates in the
\ncountry to decline from currently high levels as market sentiment
\nand risk premiums improve.<\/p>\n
But any reduction in interest rates would require the
\nconsistent implementation of key reforms, particularly in bank
\nand corporate restructurings. It said that despite progress in
\nrecapitalizing state banks, more work needs to be done.<\/p>\n
It said the government should divest the large holdings it has
\nbuilt up in the banking system since the crisis began.<\/p>\n
The IMF said that a supportive fiscal stance is appropriate
\nthis year but that fiscal consolidation should start in 2001,
\ngiven the government's high debt level.<\/p>\n
Indonesia's IMF program envisions gross domestic product (GDP)
\ngrowth of 3 to 4 percent for 2000, with average annual inflation
\nalso at 3 to 4 percent.<\/p>\n
The budget deficit, targeted at 4.8 percent of GDP, should
\nhelp promote recovery, while ensuring adequate protection for the
\npoor, the IMF said.<\/p>\n
But Indonesia should prepare for a tighter budget during 2001,
\ngiven the growth in public debt, the IMF said. The IMF also urged
\nIndonesia to move cautiously with plans to allow more local
\nautonomy over public spending, to ensure sustainable revenues and
\ndelivery of services.<\/p>\n
The IMF praised Indonesia for maintaining its floating
\nexchange rate and open capital account.<\/p>\n
The IMF reiterated its disappointment with the slow pace of
\ncorporate debt restructuring, a prerequisite to stimulating new
\nflows of credit and investment.<\/p>\n
\"Strong political leadership is needed to change the incentive
\nstructure faced by recalcitrant debtors,\" the IMF said.<\/p>\n
The IMF noted \"considerable progress\" in recapitalizing state
\nbanks, albeit at a substantial increase in the national debt. But
\nstate banks continue to suffer high operating costs and low
\nearnings potential.<\/p>\n
The IMF underlined the need for vigilance on the part of the
\nsupervisory agencies, to ensure continued financial and
\noperational restructuring, especially of the state banks, with
\nthe help of international expertise.\"<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/imf-urges-indonesia-to-ensure-recovery-does-not-falter-1447893297",
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