Govt, IMF discuss another revision of RI state budget
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)