Very risky generosity

When this country faced a dire economic crisis under president Sukarno in the early 1960s, many people said that had the crisis hit one of our neighbors it would have collapsed.

However, there is no comparing that crisis with today's economic catastrophe in that our country could collapse if no workable and conceptional plan is found, and fast.

What makes this crisis worse is the difficulties assaulting us from so many different directions, which ironically include the problems caused by the administration itself.

The most dangerous of the present government policies are its populist measures. Although the exact budget for the policies has not been made available, surely it reaches trillions of rupiah since it covers many sectors, including fuel, food and cooking oil, electricity and education.

It is true that the government has secured an agreement from the International Monetary Fund (IMF) which allows it to continue providing subsidies on food, medicines and fuel. But the situation will become more serious as the years pass.

Fuel consumption rose 4 percent last month despite an increase in fuel prices by between 25 percent and 71 percent. The government initially projected its fuel subsidy to reach Rp 9.4 trillion (US$620 million) this fiscal year on the assumption that the exchange rate would average Rp 6,000 per U.S. dollar. This means the subsidy rises Rp 5 trillion every time the rupiah's value falls by Rp 1,000 to the dollar.

The government seems to understand the negative impact of its generosity, but since its basis is to buy popularity and people's trust little can be said to stop this. Lack of legitimacy and public trust has become the blight of the present administration.

The problem has been worsened by the fact that so far the people have yet to see any impressive economic rehabilitation plan. Although every thinking citizen understands that the government cannot do that much, the public did not expected the condition to deteriorate, or that the authorities' actions would put the nation at further risk.

What the government is doing now is very dangerous, and its populist steps could very likely backfire because on one hand public anger over increasing prices will subside. But on the other hand it will be a fatal blow to both state oil company Pertamina and state electricity company PLN. So reallocating inadequate state funds to subsidize basic needs will heal some diseases but cause others.

The policies are not only serious, but also fatal. Sri Mulyani Indrawati, a noted economist, warned last week that if this continues the economy will deteriorate to such an extent that within two or three years the country will be in its death throes.

The government -- like others who have a legitimacy problem -- may be reacting negatively to criticism. And it could continue to do so until it realizes that the situation has deteriorated so much that it is beyond salvation.

We sincerely hope that President B. J. Habibie will be wise enough to lend an ear to the voices of critics, because the first casualty of his policies will be our nation, which may be too feeble to shout for help when doomsday comes.