Capital inflows 'have destabilizing impact'
Capital inflows 'have destabilizing impact'
NEW YORK (Dow Jones): Although capital inflows will be crucial
in reactivating the Indonesian economy, they can have a very
destabilizing impact and need to be monitored, the head of the
country's central bank said Friday.
"While a speedy recovery is highly desirable, we have to avoid
falling in the same trap in the future," Sjahril Sabirin said in
a prepared statement during a conference on Indonesia's economic
outlook organized by the Asia Society.
"While we are fully aware of the importance of capital
inflow...we have learned a lesson that short-term capital inflow
can be volatile and destabilizing and therefore should be kept
monitored and checked," Sjahril said.
In his statement, Indonesia central bank governor Sjahril
reiterated that the government has put in place a system to
monitor offshore liabilities of Indonesian companies.
"In the spirit of market-friendly policy, a (prudent)
reporting system and external debt management are deemed
necessary. In this respect, we introduced a reporting system on
foreign liabilities in April this year," he said.
Indonesia's senior economics minister Ginandjar Kartasasmita
earlier Friday told reporters in Jakarta that his government was
consulting with the International Monetary Fund and the World
Bank to gauge their views on a plan to better monitor the flows
of capital.
Back in New York, the head of Indonesia's central bank
stressed that his country had already introduced several
legislative measures to revamp the country's economy.
"Notwithstanding the problems and sufferings we have had to go
through, we have taken advantage of the opportunities arising
from the difficulties to improve our economic, social, political
and legal structures," he said.
Stressing the magnitude of the crisis hitting Indonesia,
Sjahril said that the country's economy could contract by as much
as 15 percent of gross domestic product in 1998.
The government's official forecast is for a 13.7 percent
economic downturn for this year and inflation of 80 percent. But
most recent data show that the Indonesian economy slumped 17.4
percent in the third quarter of 1998 alone.