BI governor urges continuance of financial reforms
BI governor urges continuance of financial reforms
SINGAPORE (AFP): Indonesia's central bank governor said Wednesday that the incoming president had to push ahead with crucial financial reforms amid the arduous task of rehabilitating the crisis-struck economy.
Bank Indonesia Governor Syahril Sabirin spoke to reporters here hours before Abdurrahman Wahid was elected as the country's new president.
"Whoever is the next president, I think we should work together to continue with the economic program," Syahril said on the sidelines of the World Economic Forum's East Asia conference.
"I think we should continue with the current program, the thrust of which is restructuring the financial sector. In my view the most important thing is continuing with the bank restructuring program."
Incumbent B. J. Habibie dropped his bid for a new term after receiving the equivalent of a no-confidence vote from the national assembly.
His Golkar party also ended up without a candidate for the top post, which saw a one-on-one contest between popular opposition leader Megawati Soekarnoputri and Wahid, who is backed by a coalition of Muslim parties.
Wahid, a 59-year-old clinically blind cleric whose economic policies have not been publicized, beat Megawati 373 to 313 in the vote count.
The Indonesian rupiah, which closed at 7,605 against the U.S. dollar on Tuesday, rose past the key psychological level of 7,000 on Wednesday after Habibie's withdrawal from the presidential race and Golkar's failure to field any candidate for the presidency.
But it retreated to close at 7,550 in Singapore trading Wednesday after reports of a bomb blasts and violence in Jakarta following Wahid's election.
"A few more blasts like this and markets will be severely hit again," warned Sani Hamid, analyst with Standard and Poor's MMS in Singapore.
Sani said the markets had "overly anticipated a Megawati win and forecast that the vice-presidential nomination on Thursday would be closely watched and was "another potential market moving factor."
Mari Pangestu, a prominent analyst on Indonesia's economy, told the World Economic Forum conference here that the new Indonesian president would face formidable challenges, including resolving the Bank Bali scandal.
Habibie's government has been tainted in the run-up to the election by the scandal over the payment of an 80-million-dollar commission by troubled Bank Bali to a company linked to Golkar, and a decision to drop a corruption probe of Soeharto, Habibie's political godfather.
Mari said the new government would have to grapple with the task of economic and financial restructuring, which would be painful, and added that it would probably follow the prescriptions of the International Monetary Fund.
She said the new administration might face difficulties, for instance, when it came to lifting fuel subsidies and accelerating bank restructuring and recapitalization, which were highly charged political issues.
The IMF and the World Bank have for about a month suspended crucial loan installments to Indonesia because the Bank Bali scandal has not been resolved.
Chances of them lifting the aid suspension are now bright following a Jakarta court's decision this week authorizing full public release of a controversial report on the scandal.
But the World Bank's senior vice-president Joseph Stiglitz told the conference here Tuesday that Indonesia needed stronger economic reforms even with the best government in place if it wished to quickly recover.
Syahril said Wednesday that based on latest estimates, Indonesia's gross domestic product should be between zero to minus one percent for 1999 as the economy recovered from financial and political turmoil.
"If we can gather together all the forces, we can be optimistic of achieving the 2000 growth rate of two to four percent," he said.