IMF warns RI of challenges ahead
IMF warns RI of challenges ahead
The Jakarta Post, Jakarta
More prudent budgeting and the removal of fuel subsidies are
important challenges ahead for the government, if it wants to
consolidate the progress Indonesia has made in recent years, the
International Monetary Fund says.
In its latest review of Indonesia's economy, the IMF's
Executive Board said in a statement it "welcomed the continuing
improvement in the overall performance of the Indonesian economy
in recent years.
"Which has been manifested in the considerable progress toward
achieving macroeconomic stability, lowering public debt,
restoring the health of the banking system, and reducing
vulnerabilities."
The IMF, however, said Indonesia still faced key policy
challenges in stimulating economic growth to create jobs and
reduce poverty.
"Further fiscal consolidation is a key priority in the
authorities' strategy to lay the basis for sustained economic
growth," it said, welcoming the recent revision of the 2005 state
budget, which reflected more realistic assumptions and aimed for
a reduced deficit.
The IMF also stressed the importance of reducing fuel
subsidies, which have put much stress on the budget amid rising
global oil prices.
On the central bank, the IMF commended Bank Indonesia (BI) for
its continued tight monetary policy and its focus on containing
inflation through its newly introduced benchmark interest rate
scheme.
"Convincing use of the new interest rate policy will help
maintain stability and enhance confidence," it said, adding that
further tightening might still be desirable in view of the recent
pressures on inflation and the exchange rate because of their
possible effect on economic growth.
The IMF also recommended BI limit its interventions into the
foreign exchange market to those needed to counter short-term
volatility.
The review is part of IMF's non-binding, post-program
monitoring with Indonesia, which began last year after Indonesia
ended its program under the IMF following the 1997 Asian
financial crisis.