New leader will still face complex challenges: Mari

JAKARTA (JP): Indonesia's prospective new leader would still have to deal with the complex challenges of economic recovery and political stability, Centre for Strategic and International Studies (CSIS) economist Mari Pangestu warned on Monday.

Mari said that one of the most daunting challenges for whoever would lead the country would be to deliver domestic macroeconomic stability.

"The problems we are facing are very huge such as the budget, inflation, and bank restructuring. These must be dealt with by whoever would lead the country amid the limitations posed by the weak legal (system) and (state) institutions," she told reporters on the sidelines of an economic discussion.

The camp of the embattled President Abdurrahman Wahid is still in intense talks with the country's prominent political figures to resolve the national leadership crisis. There has been growing pressure, particularly from legislators, for the President to step down and hand over power to the popular Vice President Megawati Soekarnoputri.

The House is set to convene on Wednesday to decide on whether to impeach the President or not.

The current political impasse has contributed to the sharp drop in the value of the rupiah against the U.S. dollar, which creates inflationary pressure and threatens the 2001 state budget deficit to widen to a dangerous level of around 6 percent of gross domestic product.

Some economists have suggested that a change in the country's leadership would help stop the rupiah's fall and remove other economic woes.

But Mari said that the country's economic problems were far more complex, pointing out to delays in the disbursement of loans from multilateral, capital outflow, fiscal problem, and worsening of macroeconomic indicators.

"We are in for a slower economic growth ... this is a tremendous problem," she said.

"Macroeconomic stability has now become the most important issue," she said.

She said that if the government failed to deliver macroeconomic stability, the country could easily fall into a second economic crisis.

Mari said that one of the most important agenda for the government to help resolve the economic woes was to immediately amend relations with the International Monetary Fund.

"The IMF wants to see the government implement credible (economic) policies," she said.

The IMF delayed the disbursement of its third US$400 million loan tranche to the country late last December due to signs that the government was wavering with the implementation of key economic reform program.

The IMF money is seen as a crucial factor to allow the World Bank, the Asian Development to provide a greater financial support for the country, and for the Paris Club of creditor nations to provide sovereign debt restructuring facility which is crucial for the sustainability of the state budget.

The IMF has applauded the government's decision to launch difficult measures to contain the state budget deficit at a safer level of around 3.8 percent of GDP through a series of painful measures, and to delay the plans to issue bonds backed up with revenue from the sales of natural gas to Singapore.

But the Fund has insisted that it would only agree to resume economic talks if the government fully adopted the recommendation of an independent panel team on the revision of the Bank Indonesia law.

The government has proposed that the current Bank Indonesia board of governors must resign once the new revised law has been approved by the House, but the panel has suggested that such a proposal is a serious mistake.

"It is crucial for the IMF team to come and begin (economic) talks with the government," Mari said.

She also said that it would be important for Bank Indonesia to maintain its tight monetary policy amid the current uncertainties to help curb inflation.

She said that a better coordination between Bank Indonesia and the government over monetary and fiscal policies was crucial to help maintain inflation at a reasonable level.

On the state budget issue, Mari warned that there could be higher deficit if the government failed to meet the set of targets. (rei)