Conflicting signals contribute to uncertainty: Minister
The Jakarta Post, Jakarta
The rupiah's recent slide was attributed in part to declining market confidence in the prospects for the economy, with persistent conflicting signals from the government exacerbating uncertainty, a minister said on Monday.
State Minister for National Development Planning Sri Mulyani Indrawati said the government had come to realize that it was not going to be easy to achieve all the economic targets it had pledged it would achieve, given the complexity of the problems being confronted by Indonesia.
"From day one, the government has given the strong impression that we are aiming for very strong growth," she told a seminar attended by leading newspaper editors from Asia and Europe and organized by Singapore-based Konrad Adenauer Foundation in cooperation with The Jakarta Post.
She went on to say that the government had said that it needed to first work on improving the investment climate.
However, the government realized that it was much easier said that done to overcome the long-chains of bureaucracy, rampant corruption, ailing infrastructure and so on, she said.
The government has laid out ambitious economic targets for this year and the next four -- and all depend heavily on the revival of foreign investment lured by expected fast improvement in the country's business and investment climate.
However, with investment yet to fully pick up, the country has to weather a storm caused by a rapid surge in oil prices, currently hovering at above US$70 a barrel. This has put pressure on the already cash-strapped state budget as it has to allocate more funds for the fuel subsidy.
Having been a net oil importer for the past several months, the country has to find huge sums of American greenbacks to finance its oil imports. State oil and gas firm PT Pertamina admitted recently that at current oil price levels, it had to spend about US$1.6 billion per month to import oil, both crude and refined.
Last week alone, the rupiah lost close to 5 percent of its value. On Monday it closed at 10,840 to the dollar -- the lowest level since September 2001. Riding the downward momentum was the Jakarta Composite Index, which fell by a staggering 5.16 percent on the day to close at 994.77 -- the first time this year that it has closed below the 1,000 point level.
In spite of all the negative sentiments, Sri Mulyani said the government intended to restore market confidence by strengthening the country's fundamentals.
"Indonesia will work on the fundamentals, rather than taking shortcuts, which will just create more problems," she said.