IMF says LoI to remain as is
Berni K Moestafa, The Jakarta Post, Jakarta
Following its positive remarks about Indonesia's 2001 budget performance, the International Monetary Fund (IMF) has also expressed confidence in the country's economic reform targets, despite a looming global recession.
Daniel Citrin, leading a visiting IMF team to Indonesia, said on Friday that Indonesia would not need to revise its reform targets.
"There is no need to change the targets," said Citrin in response to questions about the Letter of Intent (LoI), a lending agreement with the IMF that outlines Indonesia's reform targets.
Citrin gave no further details. But his assurance could soothe growing concerns here over the fallout from last month's terrorist attacks against the U.S.
The attacks crippled U.S. consumer confidence, and are expected to drag down investment confidence as well, a combination that could leave the world's largest economy mired in a prolonged slump.
Indonesia, which has exported its way out of the 1997 economic crisis, mainly to a previously bullish U.S market, may soon find itself losing steam as it tries to sustain its nascent economic recovery.
Export and strong consumer spending have been fueling Indonesia's economic growth. Now, exporters are warning that sales may drop by 20 percent from last year's US$62 billion.
This outlook could undermine consumer confidence, as consumers are likely to delay spending amid the heightened uncertainty.
Calls by businessmen for an economic stimulus package received only a lukewarm, if not cold, response from the government.
The government dashed hopes for a cash-based emergency package, saying that it was not always what the economy needed.
Finance Minister Boediono said the best stimulus Indonesia could hope for was political and security stability.
Uncertainty on the global front, and the government's apparent indecision in the face of it, has taken its toll on the rupiah.
Since the Sept. 11 attack the rupiah has lost 7 percent of its value, and only recently regained some ground.
Bank of Indonesia Deputy Governor, Miranda Goeltom, said the market's aversion to the local unit was fading.
She said the market had begun to judge outside developments from a more rational perspective. This, coupled with the Bank of Indonesia's intervention, had been responsible for the recent strengthening of the rupiah, she said.
"The market has overreacted on worries of a U.S. strike," Miranda explained, referring to a possible attack against Afghanistan for refusing to surrender Osama bin Laden.
Miranda said the slump in the rupiah was only temporary and expressed confidence that the unit would regain its stability.
The central bank has kept interest rates tight to weaken dollar buyers by absorbing the rupiah into promissory notes.
Rates on Bank of Indonesia promissory notes have been hovering well above the state budget assumed level of 15 percent. They now stand at 17.59 percent.
And despite signs of a stronger rupiah, Miranda indicated interest rates were to remain high.
"We will refer to achieving our base money supply target this year," she said.