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
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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.