Government asked to monitor current account deficit
Government asked to monitor current account deficit
JAKARTA (JP): Members of the House of Representatives urged
the government yesterday to closely monitor the country's
widening current account deficit and mounting foreign debt.
The request, made in the wake of last week's run on the
rupiah, was made during the first round of the deliberation of
the 1995-96 draft budget.
The Indonesian Democratic Party's faction in the House warned
that the current account deficit could become a serious problem
in the next fiscal year if no concrete measures were taken.
"The country's balance of payments should be closely monitored
as the expected surge in imports resulting from the increase in
new investments could further worsen the country's current
account performance," the faction's spokesman, Soedaryanto, told
the House's plenary session, which was attended by Minister of
Finance Mar'ie Muhammad.
Foreign fund managers dumped the rupiah last week, fearing
that a Mexican-style devaluation might also take place in
Indonesia. The Mexican financial crisis also rocked other
emerging markets, including Malaysia, the Philippines and
Thailand.
The Indonesian Democratic Party estimated that the current
account deficit might exceed the projected level if no
appropriate steps were taken to curb imports and mounting foreign
debt, and to improve the competitiveness of the country's non-oil
exports.
The current account deficit is projected to further expand to
US$4.09 billion in 1995-96 from the estimated $3.56 billion this
fiscal year and $2.94 billion in 1993-94.
The government said that the current account deficit,
accounting for 2.3 percent of the country's gross domestic
product, is still at a safe level.
Minister Mar'ie said that the country's foreign debt, totaling
around US$93 billion as of September last year, was not a cause
for alarm, given the large capacity of the country's economy.
Fears
Soedaryanto said that the government had to take concrete
steps to allay fears about a possible devaluation, as issuing
promises would not be sufficient.
The Moslem-dominated United Development Party's (PPP) faction
also stressed the need for a more prudent policy in managing the
balance of payments and the country's foreign account deficit.
The PPP shared the Indonesian Democratic Party's view about
the need for closer control of foreign debt and import activities
as the worsening of those two economic fundamentals could
undermine the country's economic stability.
The PPP faction's spokesman, Mukrom As'ad, said that the rise
in the country's foreign debt, estimated to reach $100 billion in
the next fiscal year, should be curbed as the prospects of the
country's exports could become more uncertain in the future.
"If we fail to improve the competitiveness of our products, we
will become a loser in the world market," he said of the need to
improve the quality of local products in the face of economic
globalization. (hen)