New leader will still face complex challenges: Mari

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)