Political troubles put pressure on reform plan: Prijadi<\/p>\n
HONOLULU, Hawaii (AFP): Besieged Indonesian President
\nAbdurrahman Wahid's political troubles are putting severe
\npressure on his country's efforts to restructure a financial
\nsector ravaged by the Asian crisis, officials said here Friday.<\/p>\n
Indonesian Finance Minister Prijadi Praptosuhardjo, who was
\nattending an Asian Development Bank (ADB) meeting here, said "the
\nsituation has been worsening over the past few months."<\/p>\n
But he reaffirmed Jakarta's commitment to wide-ranging reforms
\npledged to the International Monetary Fund (IMF).<\/p>\n
The stress has raised the cost of restoring the health of the
\nbanking and corporate sectors, and forced the government to delay
\nreforms which comprise the terms of the IMF-led bailout package,
\nhe added.<\/p>\n
"The political uncertainty that Indonesia's nascent democracy
\nbrings along with it has increased the perception of the
\ncountry's risk," Prijadi told a forum on the sidelines of an
\nAsian Development Bank meeting here.<\/p>\n
"This has driven the rupiah down and domestic interest rates
\nup" to about 10.5 percent as of last month, he added.<\/p>\n
Edwin Gerungan, chairman of the Indonesian Bank Restructuring
\nAgency (IBRA) set up by the government to clean up the wreckage
\nof the 1997 crisis, said the interest rate was now above those of
\nfixed-rate bonds issued by the government to recapitalize the
\nbanking system.<\/p>\n
"The outlook for the banking sector is positive. However, we
\nalso understand that the interest rates must be lower than at
\ncurrent levels because many of the banks were recapitalized with
\nfixed-rate bonds which are yielding only 10 percent," Gerungan
\nsaid.<\/p>\n
Forty percent of the banking system's total assets are in
\ngovernment bonds, he told the same forum.<\/p>\n
The banks finally turned a profit last year, but now "if the
\ninterest rates continue to be at higher levels, some of the banks
\ncould be suffering from negative spreads."<\/p>\n
Prijadi said the political crisis will force the government to
\nask parliament to review the fiscal 2001 budget.<\/p>\n
"With one third of our budget expenditures allocated to
\nservicing interest on the recapitalization bonds and higher debt
\nservice payments due to higher domestic interest rates and weaker
\nrupiah," the fiscal deficit could rise to six percent of gross
\ndomestic product (GDP), he said.<\/p>\n
Indonesia's debts amount to Rp 1,206 trillion, roughly
\nequivalent to its 2000 GDP, compared to a debt level of 50
\npercent of GDP in 1997.<\/p>\n
The country's economic managers are working with the IMF to
\nput together a package to bring the deficit back to the original
\ntarget of 3.7 percent of GDP, Prijadi added.<\/p>\n
"We have been following the IMF program for more than three
\nyears," he said. "We will continue to remain committed to the
\nprogram."<\/p>\n
He admitted that the difficulty was partly owing to "our
\nfailure to implement some of the measures the government proposed
\nto parliament," including expansion of the tax base and reducing
\nfuel subsidies.<\/p>\n
"The social tension in the country simply ran too high" to
\nrisk implementing them, said Prijadi, but added that legislators
\nwere now more receptive to the package of amendments.<\/p>\n
"We are quite pleased that parliament has understood the need
\nto quickly approve a package proposal through a budget revision,"
\nhe said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/political-troubles-put-pressure-on-reform-plan-prijadi-1447893297",
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