No fiscal stimulus from govt: Minister
No fiscal stimulus from govt: Minister
The Jakarta Post, Jakarta
Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Jakti said the government would not provide fiscal stimulus to
boost investment, as this would have a negative impact on the
overall economy.
"The only real way to provide stimulus is by increasing the
(state budget) deficit. Not only is this contrary to our mandate
from the People's Consultative Assembly and the House of
Representatives, but it triggers exactly the kind of fears the
government is trying to lay to rest. Instead of triggering
investment, such a stimulus triggers capital flight and
inflation," the minister said in a speech at a workshop on the
government's macroeconomic policies on Thursday.
He added that a looser monetary policy by the central bank
also would not push economic growth.
Dorodjatun's statement comes as some businesspeople call on
the government to provide a fiscal stimulus package to bolster
investment activity and push economic growth. The House of
Representatives is currently debating the government-proposed
2004 state budget, which has been criticized by some for lacking
stimulus for the economy.
Dorodjatun said the government was committed to maintaining
current macroeconomic stability, with an outlook on further
declines in the budget deficit and the government debt to gross
domestic product ratio.
"Our macro strategy is working," he said, pointing to the
current strengthening in the rupiah, lower inflation and
declining domestic interest rates.
He acknowledged, however, that macroeconomic stability had not
translated into brisker investment activities.
"Security, infrastructure and other problems are concerns as
well," he said, adding that legislative elections next year and
the decision by the government not to extend the existing
International Monetary Fund economic bailout program when it
expires later this year were creating nervousness among some
investors.
"The government is confident that the 2004 elections and our
transition from the IMF program will go well, but it is
understandable if investors remain cautious," he said.
Dorodjatun said that as a consequence of ending the IMF
program, there would be a significant financing burden for the
country which would likely persist until 2007.
"This burden will have to be met by the government issuing new
domestic and foreign bonds. This limits our room to maneuver and
leaves us captive to investor sentiment," he said.
He said the government's exit strategy from the IMF was
designed to accommodate the above concerns.