Consistency behind New Order's success: Siber
Consistency behind New Order's success: Siber
JAKARTA (JP): A former International Monetary Fund (IMF)
representative to Indonesia, Kemal Siber, said yesterday that
consistent policies in fighting hyperinflation were behind the
New Order government's success in rehabilitating and stabilizing
the Indonesian economy in the late 1970s.
But Siber would not say whether the new order government is as
consistent as it was in the past, although he hinted that it
would be more difficult for the current government to tackle
inflation problems similar to those faced in 1966.
"I think in the last 25 or 30 years, Indonesia has done well.
Your problem is now how to reduce inflation from 10 percent to 5
percent (per annum)."
"I found out during my last three years of experience that
it's more difficult for you to reduce (inflation) from 10 percent
to 5 percent, compared to (a reduction) from 600 to 100 percent
in 1967," he told a seminar here yesterday titled Indonesia:
Economic Rehabilitation and Stabilization 1966-1968.
The seminar was organized by the University of Atma Jaya to
honor the New Order's first finance minister, Frans Seda, on his
70th birthday.
Siber said that the New Order government, after taking power
in 1966 with the help of several noted economists later known as
the "Berkley Mafia", tightened controls on budgetary expenditure,
budget deficits and domestic credit expansion, which the Old
Order government had let run wild. And on the sectors that the
Old Order had tightly regulated, such as foreign trade and the
payments system, the New Order had liberalized.
The policy of subsidizing essential consumer goods such as
fuel and electricity ended with the New Order to eliminate price
distortions, but this caused sharp price rises.
He said the main factor behind hyperinflation was monetary
expansion caused by huge budget deficits.
The "Berkeley Mafia", headed by economist Widjojo Nitisastro,
proved they could rehabilitate the Indonesian economy from a
hyperinflation situation by gradually reducing budget deficits.
Siber said the establishment of balanced budgeting had solved
the country's hyperinflation.
He also said that quarterly monitoring of budgets had helped
the government to accelerate economic stabilization because
quarterly expenditure could be adjusted to balance budgets.
"In short, quarterly budget programming was implemented
successfully and effectively, an important factor ending the era
of budget deficit financing in Indonesia."
Indonesia's annual inflation rate declined sharply from 635
percent in 1966 to 112 percent in 1967. The inflation rate fell
to 9.9 percent in 1969.
On future challenges for Indonesia, Siber said that because
the country had low income and low savings rates, it needed good
debt management to improve its credibility. (alo)