Gus Dur told to stop creating controversy
JAKARTA (JP): The recent signing of the new letter of intent by the government and the International Monetary Fund (IMF) should provide enough momentum to revive confidence in the country's economic reform program, experts say.
However, noted economist Sjahrir said it was important for President Abdurrahman Wahid to avoid creating new controversy to maintain the positive momentum.
"The important thing is that Gus Dur must stay away from making unnecessary statements that only create controversy," Sjahrir said, referring to the President by his nickname.
He pointed out that the President should not have called on state banks to help boost the weakening rupiah because the banks did not have sufficient resources and were still undergoing crucial recapitalization.
"Gus Dur must listen to his (economics) advisers ... it's now crucial to maintain the confidence of the market," he said.
Abdurrahman urged state banks last week to buy dollars to help support the weakening rupiah, and also called on the supposedly independent central bank to take stronger action to rescue the local unit.
The government finally signed on Wednesday a new letter of intent with the IMF to pave the way for the release of a US$400 million loan early next month.
The new letter of intent basically contains additional economic measures to support the IMF-sponsored economic reform program agreed upon in January to help revive the crisis-hit economy.
The loan was supposed to be disbursed in April but was delayed due to the slowness of the government in implementing key economic reform measures.
The delay has created uncertainty over the government's commitment to economic reform and contributed to the depreciation of the rupiah.
Centre for Strategic and International Studies (CSIS) economist Pande Raja Silalahi said the signing of the new letter of intent should help convince people of the government's commitment to economic reform.
Pande pointed out that the rupiah had managed to gain most of its lost ground since Wednesday, immediately after the signing of the new letter of intent.
"But what is important now is to deliver what has been promised and to avoid creating new controversy," he said, pointing out that the recent fall of the rupiah was mostly caused by noneconomic factors.
He said the market would particularly keep a close eye on progress with the government's bank recapitalization program and the restructuring of the country's private sector debt overhang.
The rupiah was badly hit over past weeks due to a combination of external and internal factors, causing the local unit to plunge to a seven-month low of Rp 8,700 to the U.S. dollar last week.
Uncertainty over the country's economic reform program and continuing political infighting also created the jitters among investors and the currency market.
The rupiah closed at 8,338 per dollar late on Friday.
Sjahrir also said that the President should stop his political maneuvering because it could cause uncertainty among investors and the market.
He pointed out that the recent dismissal of Laksamana Sukardi as the state minister of investment and state enterprises development was the prerogative of the President, but by saying that Laksamana was replaced because he was involved in corruption, collusion and nepotism was inappropriate.
Laksamana is a senior member of Vice President Megawati Soekarnoputri's Indonesian Democratic Party of Struggle, which has the most seats in the House of Representatives.
Sjahrir also said the President must stop thinking that other people were trying to overthrow his administration.
"Like it or not, this is a legitimate government ... there's no reason for us to strive to topple the current government," he said.
The administration of Abdurrahman is the country's first democratic government, elected last year after more than 32 years under the authoritarian leadership of Soeharto. (rei)