Jakarta's new budget toes IMF line
Jakarta, Jan 23
Indonesian finance minister M Muhammad presented a revised 1998/99 budget to parliament on Friday that raised revenue and expenditure but appeared to closely track an agreement with the IMF last week.He predicted zero economic growth, an inflation rate of 20 per cent and a rupiah rate of 5,000 to the US dollar. The speech was confined to budgetary figures, making no mention of economic reforms agreed with the International Monetary Fund in return for a $43 billion bail-out. Economic analysts, however, noted that president Suharto had already announced a series of sweeping reform measures after signing a new memorandum of understanding with the IMF last week. The previous budget address delivered by Suharto on January 6 had failed to impress financial markets for lack of specifics on reform and for some dubious figures, including 4 per cent economic growth, 9 per cent inflation and an exchange rate of 4,000 rupiah to the dollar. Mar'IE's speech was delivered before the stock market opened, but
brokers anticipated prices would remain weak on the problems of the rupiah, which slipped to 14,050/15,050 from a Jakarta opening of 13,750/14,750. The revised budget, balanced by law, was set at 147.22 trillion rupiah compared to the January 6 budget estimate of 133.5 trillion rupiah. This was an increase of 45.6 per cent over the current budget ending March 31. The minister put controversial fuel subsidies for the coming fiscal year at 7.45 trillion rupiah compared with 10.08 trillion in the earlier discredited budget. Price increases as a result of the fall in the rupiah and a devastating drought last year have already sparked panic food buying through the sprawling archipelago and some price riots in East Java earlier this month. Increases in fuel prices in a nation of 17,500 islands heavily dependent on transportation will boost overall inflation. Economic analysts said the revised budget appeared to hold no surprises. Indonesian banking sources had said before Mar'IE presented it in parliament
that the budget would adhere closely to the agreement with the IMF announced last week. The government has already set about implementing various reforms, including a series of mergers in the banking system, abolition of agricultural and other cartels and monopolies, the abandonment of several expensive infrastructural projects, and an end to state backing for controversial national car and aircraft projects. Several of the projects were directly linked to members of the president's immediate family and close business associates. Meanwhile, the Group of Seven countries (G-7) will discuss Asia's economic woes next month, but it is now time to worry about competition from cheap Asian exports, French finance minister Dominique Strauss-Kahn said on Thursday. He said the worst of the current crisis in south Korea and southeast Asia may have passed. However, another problem would emerge in its wake -- ``super-competition'' from Asian goods made much cheaper by the slide in currencies in the region relative to
the dollar. A scheduled meeting of finance ministers from the seven richest industrialised nations in London on February 21-22 would provide a forum for discussing the crisis, he said. "Let's start with a discussion on this at the G-7 and we'll see at that G-7 meeting what decision to take on the course thereafter," he said. If the current mix of debt, currency and banking instability were to blow over, many in southeast Asia would start to sell their wares again on world markets. cheaper than before the crisis, the minister said. "The issue which will arise immediately after (the current crisis) is a return to normal `'.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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