Wed, 14 Jun 2000

Government ponders revising economic aim

JAKARTA (JP): The government may have to revise its macroeconomic targets for this year if the rupiah continues to weaken, a government adviser said on Tuesday.

Anggito Abimayu, a member of the National Economics Council (DEN), said the targets seemed to be no longer realistic amid the current condition.

"Yes, we'll review (the macroeconomic targets), checking to see if the exchange rate (of the rupiah to the U.S. dollar) is in line with the current condition and the projection for inflation is correct or not," he said.

Anggito was speaking following a meeting between the government and the visiting International Monetary Fund (IMF) review team.

He did not elaborate any further.

There have been increasing calls for the government to revise its macroeconomic assumptions for the 2000 state budget as the rupiah has continued to weaken over the past month.

The rupiah closed higher at Rp 8,585 to the dollar on Tuesday from Rp 8,608 on Monday following a statement from Bank Indonesia deputy governor Miranda Goeltom that the interest rate on one- month Bank Indonesia SBI promissory notes was expected to increase at Wednesday's auction.

But Tuesday's closing is still much lower than the Rp 7,000 to the dollar government target used in the 2000 state budget.

Minister of Finance Bambang Sudibyo, however, has repeatedly rejected calls for the government to revise the rupiah assumption. "If we revise the exchange rate assumption, the market will think we're nervous ... the market will think we can't cope with the problem," Bambang told the House of Representatives during a recent session.

He said the weakening of the rupiah was only temporary due to noneconomic factors, and he was convinced the rupiah would strengthen to the targeted exchange rate level.

Analysts have said if the rupiah continues to weaken, the government inflation target of 5 percent to 7 percent for this year would be surpassed because a weaker rupiah would inflate the cost of imported goods.

The country's production system is still heavily dependent on imported raw materials.

Analysts also said the weakening of the rupiah would affect government spending and revenue, which in turn would affect the overall state budget.

Bambang acknowledged this, but said the net outcome was still benefiting the government.

The visiting IMF team started reviewing the implementation of the country's key economic reform program on Monday. The team will be here for two weeks.

Anggito said so far the implementation of the programs was on track.

"What I've heard from the meeting today is that everything is on track," he said.

DEN gives advice to President Abdurrahman Wahid on economic issues as a second opinion. The council often attends Cabinet meetings and government meetings with international institutions.

The IMF made the review amid a visit by World Bank vice president for East Asia and the Pacific Jemal ud-din Kassum, who met with representatives of Indonesia's main donor nations in Jakarta on Tuesday.

Kassum also met with Vice President Megawati Soekarnoputri and Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie.

Kassum's visit is to make preparations for the next meeting of the Consultative Group on Indonesia (CGI) in Tokyo slated for October 17 and October 18.

The CGI, which groups Indonesia's major donor nations, pledged in February some US$4.7 billion in loans to support the 2000 state budget.(rei)