Post-IMF program announced
Fitri Wulandari, The Jakarta Post, Jakarta
After a month-long delay, the government announced on Monday the country's post-International Monetary Fund (IMF) economic reform program, which is expected to help maintain investor confidence in the economy once the existing IMF economic bailout program ends later this year.
Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti said the program covered three main goals, including to maintain macroeconomic stability, continue banking sector reform, and increase investment, export and employment opportunities.
"This is a historical moment for us since we're the last (crisis-hit) country in Asia to complete the IMF program," he told a press conference.
Dorodjatun said President Megawati Soekarnoputri had signed a presidential decree approving the post-IMF program, which is contained in a document called the White Paper.
The complete details of the program would be published on Tuesday on the website of the Office of the Coordinating Ministry for the Economy at www.ekon.go.id, he said.
The White Paper document contains a matrix of economic reform programs and their time-table for implementation.
In the bank reform area, for example, the country's banks are expected to comply with the Basel banking principles by 2004.
The government has decided to no longer extend the current International Monetary Fund economic bailout program when it expires at the end of this year. It, however, opted for a post program monitoring arrangement with the Fund, under which the government would design its own reform program without the intervention of the IMF. Since the 1997 economic crisis, the government has to send a quarterly letter of intent (LoI) to the IMF in exchange for loans.
The economic blueprint is crucial as it would help maintain investor confidence in the economy. Presidential elections in 2004 could encourage the government to enact popular spending measures to create employment at the expense of the country's finances, some observers fear.
Dorodjatun said the macroeconomic-stability program aimed to create fiscal sustainability, lowering inflation to levels in the country's main trading partners, and to maintain healthy foreign exchange reserves in a medium term.
To achieve these goals, the government's fiscal policies would be directed towards achieving a balanced budget by 2005-2006 from a deficit of around 2 percent of gross domestic product (GDP) this year.
The government also aims to reduce its debt level from the current 67 percent of GDP to a "secure level," and press ahead of with tax reform.
Meanwhile, Bank Indonesia Governor Burhanuddin Abdullah said that to help achieve the macro-stability goal, the central bank would focus on lower inflation, and maintain a realistic exchange rate of the rupiah.
The financial sector reform is directed towards creating a safety net in the banking and financial industries through the establishment of a deposit insurance scheme, reviving Bank Indonesia's lender of the last resort role, and creating the Financial Sector Authority. Other measures include continuing bank restructuring programs such as the sale of government shares in banks; boosting measures against money laundering activities (the House of Representatives is scheduled to approve the country's new money-laundering law which meets international standards); and consolidating the insurance and pension fund industries.
Programs to boost investments, exports and job opportunities center on streamlining the investment and trade regulations; boosting legal certainty by revising the bankruptcy law and fixing unfriendly policies issued by provincial or district administrations; rehabilitating and developing infrastructure; and improving transparency in the public sector.
The government has been under pressure to push investment and export in a bid to create higher economic growth enough to generate jobs for the millions of unemployed people.