A new approach for Indonesia

Article Abstract:

It is vital that steps are taken immediately to restore international confidence in Indonesia, thus allowing both domestic and foreign investors to return capital that has been removed from the country. Particular attention must be given to ways of strengthening the rupiah without placing severe restrictions on the economy. This could be achieved through reviving the currency-board proposal and suspending the free convertibility of the rupiah, introducing controls on all capital flows. It must be recognized that the macroeconomic programme imposed by the International Monetary Fund is not working.

Administration of General Economic Programs, Foreign Economic & Financial Assistance, Column, Economic assistance, Foreign economic assistance

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Basic strength

Article Abstract:

The Indonesian financial system survived the Thai baht crisis, with only a temporary ripple in Jul 1997, because it is fundamentally sound. It has many similarities to the Thai system, including a rapid expansion of external debt from the private sector, and increasing property loans, but confidence in the Indonesian economy is illustrated in the continuing strength of the Indonesian rupiah and Indonesian stocks. Confidence is helped by factors including the freedom for the rupiah to fluctuate over a set range against the dollar, and the policy of control over banking loans.

Economic Programs, Administration of Economic Programs, Economic policy

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Less is more

Article Abstract:

Economists worried about a potential currency crisis in Indonesia expect modest govt measures, but on the whole the economy seems healthy. The most disturbing recent signs include slower growth in non-oil exports, which have powered the economy to an average growth rate of 6.7% since 1992, and a rapidly widening current-account deficit that could reach 4% of the GDP by year's end. Already high interest rates may rise again, or commercial banks' reserve requirements could be hiked.

Economic development, Economic indicators

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