Ministers told to fix meltdown
Ministers told to fix meltdown
Muninggar Sri Saraswati and Rendi A. Witular, The Jakarta Post, Jakarta
President Susilo Bambang Yudhoyono swore in six economic
ministers on Wednesday, emphasizing the importance of improving
the country's macroeconomic condition currently in a meltdown due
to higher inflation.
"The new economic team should immediately rehabilitate the
macroeconomic condition by prioritizing efforts to curb
inflationary pressure in its fiscal and monetary policies to be
discussed in consultation with the central bank," he said.
Susilo also urged the ministers to closely monitor and improve
the distribution chain of goods as part of a move to help ease
inflation.
The new ministers are Coordinating Minister for the Economy
Boediono, Coordinating Minister for People's Welfare Aburizal
Bakrie, Minister of Manpower and Transmigration Erman Suparno,
Minister of Industry Fahmi Idris, Minister of Finance Sri Mulyani
Indrawati and State Minister for National Development
Planning/National Development Planning Board chairman Paskah
Suzetta.
The swearing in took place two days after Susilo announced the
"limited reshuffle" in Yogyakarta in a bid to boost his Cabinet's
economic team performance.
Inflation accelerated to 18.4 percent between January and
November, the highest in six years, after the government more
than doubled fuel prices on Oct. 1 due to rising global oil
prices and a plunge in the rupiah against the U.S. dollar.
To ease the problem, Bank Indonesia has aggressively raised
its benchmark interest rate six times in the last six months. The
central bank raised on Tuesday its rate by another 50 basis
points (bps) to 12.75 percent.
Higher inflation and interest rates have contributed to a
slowdown in economic growth, from 6.2 percent in this year's
first quarter to 5.3 percent in the third. Higher interest rates
are also likely to put a brake on the country's consumption-
driven economy, as both consumer loans and credit for business
expansion become more expensive.
Boediono, a former finance minister under president Megawati
Soekarnoputri, will work closely with Bank Indonesia to boost
efforts in stabilizing the rupiah to curb inflation.
"Part of our move to curb inflation is to maintain a stable
rupiah. The strengthening of the rupiah will help reduce the cost
of producing or importing goods," he said after the ceremony.
The rupiah has been hovering at over Rp 10,000 against the
greenback since August before climbing back at Rp 9,825 on
Wednesday over optimism that the new economic team will bring
crucial changes in economic policies.
Sri Mulyani said other efforts to rectify the economic woes
would include a plan to increase government spending for labor-
intensive infrastructure projects.
"Infrastructure spending is expected to boost productivity in
the manufacturing and agriculture sectors. However, we should
also maintain the spending balance to avoid higher demand for
goods that could eventually trigger inflation," she said.
Susilo's short-term instructions for the new ministers:
1. Create job opportunities.
2. Boost government spending for infrastructure projects that
could help drive economic growth.
3. Reactivate the real sector through the agriculture sector.
4. Improve economic growth through investments and exports.
5. Reduce poverty level and protect the economically
disadvantaged from inflation by ensuring the effectiveness of the
cash assistance program.
6. Bolster efforts to revitalize agriculture, forestry and
fishery sectors as well as the small and medium businesses.
7. Improve coordination and cooperation with the central bank
in curbing inflation, strengthening the rupiah and lowering
interest rates.
8. Urge local administrations to allocate most of their
budgets for labor-intensive projects.
9. Accelerate reform in the tax regime, budget system and
financial services sector.
10. Intensify efforts to create good governance by eliminating
the high-cost economy, illegal fees and corruption.
11. Bolster efforts to combat bird flu and other transmutable
diseases.