Sri Mulyani warns of populist policies
JAKARTA (JP): Economist Sri Mulyani Indrawati has warned that the populist measures being taken by the government to overcome the economic crisis are leading the nation into bankruptcy.
The nation is deceiving itself because the populist measures are wasting government funds at a time when state revenues are drastically low, Sri Mulyani was quoted by Antara as saying in a speech in Semarang on Saturday.
If this continues then within two or three years the economy will deteriorate and the nation will enter into a period of "near death", said the prominent economics lecturer from the University of Indonesia in Jakarta.
The government is spending trillions of rupiah in subsidies to appease and calm the people, but this is happening at a time when its income is plunging, she said.
"I think collecting 50 percent of the targeted income tax revenues for this year will be quite an achievement. Oil prices are also falling, while the president's aides are asking for money to carry out their own populist programs," she said.
The recent government decision to scale down increases in fuel and electricity prices would only lead to the collapse of the state oil company Pertamina and state electricity company PT PLN, she said, adding that this raised the prospect of power blackouts and massive fuel shortages.
President B.J. Habibie has made the provision of basic foodstuffs his chief priority. He has heavily scaled down public investment this year and reallocated scarce government funds to subsidize food prices, particularly for rice.
In its latest move the government is launching a crash program to sell rice at about one third of the market rate to 40 million poor people who are most vulnerable to food shortages.
The government is also creating labor-intensive public works projects to absorb the millions of people who have lost their jobs since the economic crisis began to bite last year.
Habibie has secured agreement from the International Monetary Fund (IMF) to continue providing subsidies on food, medicines and fuel, which the latter had sought to bring to an end.
The IMF is expected to disburse the next $1 billion of its promised $10 billion loan later this month. The Asian Development Bank and the World Bank last week disbursed $1.5 billion and $1 billion respectively in fresh loans chiefly to finance the country's social safety net program.
Sri Mulyani said Habibie would probably have to introduce policies that would leave many people unhappy if he wanted to lift the country out of the present crisis.
She said the government and the people should first forge a common commitment to getting out of the crisis.
Once this had been achieved, everybody would have to be prepared to accept tough and bitter measures to right the economy, she said.
"We made too many mistakes during the 30 years in which we enjoyed economic growth and prosperity. Now we're paying the price," Sri Mulyani said as reported by Antara. (emb)