Govt, IMF discuss another revision of RI state budget
JAKARTA (JP): The government and the International Monetary Fund (IMF) are discussing another revision of the country's 1998/1999 state budget, Minister of Finance Fuad Bawazier said yesterday.
The revision may include new assumptions about the rupiah's exchange rate, inflation rate, and economic growth rate, Fuad told journalists after his meeting with Hubert Neiss, the leader of the IMF team here reviewing the progress of the government's reforms promised in return for a massive bail out.
"The important thing for us to see now is the (budget) funding in relation to the ADB and other packages," he added.
The IMF, Asian Development Bank, World Bank, and major donor countries are currently crafting funding scenarios to help the government overcome serious fiscal constraints to provide essential goods and jobs.
Fuad wouldn't provide further details, saying that the issue was still being discussed with the IMF.
"There's progress," said Neiss following the budget discussion, but refused to elaborate.
Fuad said that the revised budget for the fiscal year beginning April 1 would not need initial approval from the House of Representatives but would be discussed with legislators when the government reported its half-yearly implementation of the budget.
The Indonesian economy, burdened by the detrimental impacts of the sharp plunge in the rupiah, is currently in the IMF's intensive care unit. The Fund is expected to soon extend the second, $3 billion, tranche of the $43-billion rescue fund it arranged in January.
The ADB and World Bank also pledged to provide humanitarian aid under a short-term safety-net program -- which is expected to total $1.5 billion -- to finance the importing of staple goods, medicines and hospital equipment. A hefty $1 billion will be used to import rice in the 1998/1999 fiscal year.
Indonesia's major donor countries have also announced similar commitments, including to provide trade financing.
Many expect the revised 1998/1999 budget to contain new target figures for inflation, economic growth, and the rupiah's exchange rate. Some estimate the exchange rate to be at Rp 6,000 to the U.S. dollar.
On Jan. 23 the government announced the IMF-sponsored fiscal budget which targeted zero economic growth, 20 percent inflation, and an exchange rate of Rp 5,000 to the dollar. This was a revision of the government's earlier targets of 4 percent economic growth, 9 percent inflation, and an exchange rate of Rp 4,000.
The relations between Indonesia and the IMF, however, reached their nadir in February as the country was alleged to be reneging on its commitment to the IMF-sponsored reforms signed in January.
This resulted in the delay of the second tranche; it was scheduled to be disbursed in the middle of this month.
Over the past several days, however, relations have improved during marathon meetings between the Fund's reform review team and Indonesia's new economic ministerial team.
Among the five areas discussed in the talks, which started last Wednesday and are expected to continue for another few days, is a review on the 1998/1999 fiscal budget and subsidies on staples.
Indonesia seems to be returning to its commitment to the IMF- sponsored reform programs, while the country is also gaining approval from the Fund to continue subsidizing essential goods.
Under the earlier reform program, the IMF demanded the scrapping of subsidies to prevent a budget deficit. But now many expect the country will receive the Fund's nod to continue subsidizing more fuel products than was initially allowed.
Indonesia is currently experiencing its worst ever economic crisis, prompted by the sharp decline of the rupiah. The currency fell to its lowest level, Rp 17,000 to the dollar, in January. Before the crisis began last July it stood at Rp 2,450.
The improvement in the relations between the government and the IMF has helped the rupiah to strengthen. It closed yesterday at Rp 8,400. (08)