RI to resist pressure to boost spending ahead polls
RI to resist pressure to boost spending ahead polls
Agence France-Presse, Singapore
Indonesia's top economic managers said Thursday they will resist populist pressure to increase spending ahead of next year's elections and will stick to a tough fiscal program after exiting International Monetary Fund (IMF) tutelage this year.
The officials, who spoke at a seminar in Singapore, said the current priority will be to rein in inflation and balance the budget rather than launch economic stimulus measures.
"The populist demand is always going to be there in every country in the world, even in the United States. In Europe you have that also," Coordinating Minister for Economy, Finance and Industry Dorodjatun Kuntjoro-Jakti said.
Asked at a news briefing if Jakarta would strictly adhere to a post-IMF economic blueprint it had earlier outlined, he said: "Yes, of course because it is agreed aready by the parliament, it is agreed by the cabinet so it is a national commitment."
Indonesia is due to exit an IMF program this year and has announced a new economic reform plan containing targets and direction for monetary and fiscal policies.
The new fiscal policy will focus on achieving a balanced budget, senior deputy central bank governor Anwar Nasution said.
"This indicates that fiscal consolidation has taken priority over economic stimulus as the primary objective of fiscal policy is to reduce the ratio of government debt to gross domestic product (GDP) to a sustainable level," he said.
The 2004 budget provides for a deficit of 1.2 percent of GDP, down from a projected 1.8 percent this year.
Monetary policy will emphasize keeping a lid on inflation, currently at six percent, and includes preservation of the floating exchange rate system and bank restructuring.
Nasution said even if Indonesia exits IMF supervision, there are no plans yet to repay early IMF funds of about seven billion US dollars, comprising 25 percent of the Bank of Indonesia's foreign exchange reserves.
However, the country will repay its debts as scheduled.
The country's current reserves of between US$32 billion and $34 billion, equivalent to seven months of imports, are necessary as a "war chest" amid political uncertainty as Indonesia holds parliamentary and presidential elections next year, he said.
Both Nasution and Kuntjoro-Jakti made presentations before Singapore business executives here to explain the country's new economic program and encourage investments.
Singapore is one of the top foreign investors in Indonesia.
Nasution said Indonesia still plans to issue $400 million worth of bonds in the global market but the timing of the offer will depend on whether the country needs the money.
The roadshows Indonesia has been carrying out in key financial centres were only meant to "test the waters," Nasution said.
"Our ratings have been upgraded so I think we are very optimistic to sell this bond if we need them but as of now, I don't think we need them.
"I think we still have enough resources to meet the budget deficit so we are very cautious to float the bond in the international market for a budget purpose. We are not doing that recklessly."