BI says continuing post-IMF reforms crucial for economy

BI says continuing post-IMF reforms crucial for economy

Rendi A. Witular, The Jakarta Post, Jakarta

Bank Indonesia (BI) governor Burhanuddin Abdullah said on Monday
that pressing ahead with the current economic reform program was
crucial to maintaining the country's economic recovery next year.

"There will be possible turbulence next year, but it can be
cushioned if the government manages to implement all the post-IMF
economic programs in a disciplined way," Burhanuddin told
businessmen during a gathering with the Indonesian Chamber of
Commerce and Industry (Kadin).

He said that pushing ahead with reform programs was crucial to
maintaining investor confidence in the economy, particularly when
the existing International Monetary Fund (IMF) economic bailout
program ended later this year, and before general elections next
year.

The government has decided not to extend the current IMF
program, but opted for a post-program monitoring arrangement
(PPM), under which the government will still hold regular
consultations with the Fund. However, the government can design
in owns reform program. Under the PPM arrangement, Indonesia
would not need to repay its loans to the IMF far ahead of
installment schedules.

Burhanuddin applauded the government's decision on this,
saying that it would allow the country to maintain a high foreign
exchange reserves level at a time of uncertainty both at home and
in the global economy.

One of the immediate impacts of exiting the IMF program is
that Indonesia would no longer be eligible for a debt
rescheduling facility from the Paris Club of creditor nations,
thus creating pressure on the state budget.

Burhanuddin said that because of the impact on fiscal
conditions, it was more crucial for the government to maintain
investor confidence.

During the meeting, the governor also urged banks to lower
lending rates to make loans more affordable to the corporate
sector, which in turn would help push economic growth faster.

The government has projected the economy to grow at around 4
percent to 4.5 percent next year, from an average of 3.5 percent
during the past couple of years.

"Based on our calculations, if we want to reach the growth
target next year, bank loans should grow by 20 to 22 percent,"
Burhanuddin said

Box

Kadin to invite foreign advisors

The Indonesian Chamber of Commerce and Industry (Kadin) has
revealed that it would invite foreign-based financial advisors to
establish a joint-monitoring team to supervise the implementation
of the government's post-IMF economic reform programs as part of
efforts to increase pressure when dealing with perilous policies.

Kadin deputy chairman Hariyadi B. Sukamdani said the move was
taken after the business lobby met with several foreign
ambassadors from the country's traditional donor nations last
week.

He said that during the meeting, the donor countries wanted
their private sector to be included in the planned monitoring
team set up by Kadin.

"We want the government to follow up our concerns. Therefore,
it is likely that we will cooperate with the private sector from
the donor countries in order to create political pressure on the
government," Hariyadi said.

Elsewhere, Indonesian Employers Association (Apindo) chairman
Sofjan Wanandi said the request from the ambassadors was a sign
of doubt of the government's commitment to applying the post-IMF
program.

"There is a distrust toward the Indonesian government. That's
why they wanted to be involved in our team," said Sofjan.

The donor countries grouped under the Consultative Group on
Indonesia (CGI) comprise, among others, the United States, Japan,
Britain, Australia, Canada, France, Germany and Italy.