Politics, disaster may slow down economic recovery
Politics, disaster may slow down economic recovery
JAKARTA (JP): A major political event next year and natural
disasters will slow down Indonesia's effort to recover from the
economic turmoil caused by the currency crisis, former finance
minister Frans Seda said yesterday.
"It will take Indonesia about two years to recover from the
current condition," Seda said.
He said next year's formation of a new cabinet, which would
most likely consist of new faces, and this year's severe drought
would impede efforts for a full recovery.
"Although it is unlikely there will be a presidency succession
next year, the President will appoint a new team of ministers
which will slow down the recovery process," he said after a panel
discussion on globalization.
The new cabinet would be expected to implement an economic
reform package, which was currently being planned by the existing
cabinet with the help of the International Monetary Fund (IMF),
he said.
The government is currently negotiating with the IMF for
financial assistance to cope with the currency crisis, in which
the rupiah has depreciated by about 35 percent against the U.S.
dollar since July.
Seda said the government needed to act immediately to prevent
the crisis from escalating, he said.
"Christmas and New Year is coming soon, followed by Idul Fitri
in January. If everything is left as it is, prices are going to
skyrocket," he said.
"The government must prevent the economy from collapsing and
take necessary steps soon to revive the economy. Otherwise,
unemployment will rise from company layoffs before these major
festivals," he said.
Economist Djisman Simanjuntak said yesterday the discussion
between the IMF and Indonesia would intensify as both parties
discuss detailed conditions.
"Negotiations with the IMF always get tight when it comes to
details, as there are always differing opinions, as with what
happened with Thailand and Mexico when they were asking for help
from the IMF," he said.
Djisman said the IMF would probably demand that Indonesia
abides by certain conditions before giving it financial
assistance.
These conditions could include certain tough measures such as
tight fiscal and monetary policies to reduce public demand to
check inflation and the current account deficit, he said.
Simanjuntak said the IMF would also most likely demand the
elimination of market distortions, including monopolies, high
custom fees and the government-determined prices of fuel and
electricity.
The IMF might also demand Indonesia remedy some of the
unhealthy sectors in the country, including the banking sector,
he said.
"I do not know how the banking sector is going to be revamped,
since the issue of banks with problems and bad credits is usually
always swept under the carpet," he said. (das)