IMF sees stronger fiscal, monetary coordination
IMF sees stronger fiscal, monetary coordination
The Jakarta Post, Jakarta
The International Monetary Fund (IMF) foresees stronger
coordination between the fiscal and monetary authorities in
navigating Indonesia's economy through the high inflationary and
high-interest rate environment.
"We met today (Friday) with the new economic team and we have
strong confidence in the good policy coordination between the
government and Bank Indonesia," IMF Deputy Director of the Asia
and Pacific Department Daniel Citrin told a news conference on
Friday.
Citrin, who ended a week-long visit in connection with the
periodic, semester review of Indonesia's economy under the terms
of the IMF post-program monitoring, was referring to his talks
with the new chief economics minister Boediono, finance minister
Sri Mulyani Indrawati and Bank Indonesia's Burhanuddin Abdullah.
He said he agreed with the immediate action agenda the new
economic team would implement, including priming the economy and
concrete measures to reinvigorate investment.
"It is important for the government to spend money next year.
Hence, we don't have any disagreement with the government's plan
to accelerate budget realization to bolster growth," added
Citrin, who was accompanied by IMF senior resident representative
here Stephen Schwartz.
He said the government had saved by slashing fuel subsidies
and it was now time to inject the savings into the economy.
He understood, though, the tricky job of the central bank in
gradually bringing down interest rates to support economic
growth, but he agreed with the government's prediction that
inflation could be brought down to between 8 percent and 9
percent next year from more than 18 percent (cumulative) this
year.
"But we are highly confident about the fiscal sustainability
even though the government's domestic and foreign debt service
burdens will be much larger next year. After all, the fuel
subsidies have been slashed and the government debt-to GDP ratio
has declined to as low as 50 percent from more than 90 percent in
2001," he said.
The high interest rates will increase the interest costs of
the government's bonds, while the foreign debt service burdens
will also rise significantly next year because the government
will no longer get debt-payment deferment from the Paris Club of
sovereign creditors.
Citrin said given the steady decline in the growth of gross
domestic product in the first three quarters -- from 6.2 percent,
to 5.84 percent and 5.34 percent -- a trend that would most
likely continue in the current last quarter, the growth for the
whole year would only be slightly higher than 5 percent.
That growth level would be similar to last year's economic
expansion of 5.13 percent but much lower than the government
target of 6 percent.
"But I think the government growth target of 6.2 percent for
next year is very difficult to achieve," he added.