IMF urges government to speed up reform program
IMF urges government to speed up reform program
Dadan Wijaksana, The Jakarta Post, Nusa Dua, Bali
The International Monetary Fund (IMF) said Tuesday that though
Indonesia had been making progress in certain areas, its reform
agenda was unfinished, resulting in modest economic growth.
IMF Asia Pacific region senior advisor Daniel Citrin
reiterated his view as outlined in his speech during the first
day of the Consultative Group on Indonesia (CGI) meeting here.
The CGI groups the country's major foreign donors.
"Growth, while positive, remains disappointing relative to the
6 percent pace needed to make significant inroads in reducing
poverty and unemployment", Citrin said.
Citrin is also currently leading an IMF team to assess the
government's reform program in return for a loan facility. He
said the IMF hoped to reach a new loan agreement with Indonesia
by the end of the first quarter under its $5-billion loan
program.
Despite success in maintaining macroeconomic stability over
the past year, Indonesia's growth still lags behind other crisis-
hit nations in the region.
The remarkable steady and solid performance against the U.S.
dollar, relatively manageable inflation rate, and the declining
trend of the Bank Indonesia benchmark interest rates have yet to
offset the setbacks in investment and export performances,
resulting in a lower than expected economic growth. After posting
a 3.4 percent economic growth in 2001, the government is now
expecting the economy to grow by 3.6 percent this year.
The figures are deemed insignificant to deal with rising
poverty and unemployment in the country. The World Bank estimated
poverty in 2002 to reach 16 percent of the total 210 million
population in the country.
The mediocre growth would also be insufficient to absorb the
estimated 2.5 million entering the workforce each year.
Therefore, Citrin suggested the government focus its 2003
program on certain objectives: consolidating recent gains in
macroeconomic stability, strengthening public debt sustainability
over the medium term, continuing to make progress in restoring a
sound banking sector capable of performing its critical financial
intermediation function and enhance the investment climate
through a range of reform measures.
Thus, it would be essential for the government to begin
tackling more decisively the problems related to the investment
climate.
To overcome this, the most profound efforts to be done would
be reform in the legal and judicial sector, deemed as critical to
produce sustained improvements in the investment climate.
Other efforts include, creating a sensible labor market policy
that can strike a balance in meeting the interests of both
employers and employees, ensuring regional autonomy does not
discourage investors and reformulating customs and tax
administration.
Despite the piles of homework, however, Citrin noted that the
government had already laid some sound foundations to meeting
such challenges.
To mention a few, he pointed out progress the government had
made during the course of last year, such as maintaining fiscal
stability, further divestment and privatization programs.