Greek crisis will not affect Indonesia: Finance minister

The Jakarta Post, Jakarta | Wed, 05/26/2010 10:52 AM | Business

Newly appointed Finance Minister Agus Martowardojo said in Jakarta on Tuesday that the Greek debt crisis which has caused share prices worldwide to fall would not affect the Indonesian economy.

Speaking to reporters after attending the plenary session of the House of Representatives, the finance minister said that the Indonesian economy remained fundamentally strong despite the significant fall in share prices and the decline in the rupiah against the US dollar in the recent days.

“I’m optimistic, Indonesia can face the financial storm safely thanks to a healthy state budget and the country’s strong cash flow,” he said. Given these encouraging economic factors he said the people need not fear any possible negative impact of the Greek crisis on the Indonesian economy.

President Susilo Bambang Yudhoyono appointed Agus as the finance minister following the resignation of finance minister Sri Mulyani Indrawati last week. She will take up her new job as one of the managing directors of the World Bank.

The President also named Director General of State Budgeting Anny Ratnawati as deputy finance minister.

“There need not be any worries after the recent changes. With my deputy, Ms. Anny Ratnawati — we have looked at internal consolidation. We are optimistic state financial resources and assets can be managed well and in an accountable way,” he said.

Agus said although he had been in his job only for several days, he had already consolidated activities within the ministry to ensure that the changes in the Finance Ministry would not negatively affect the government’s financial plans.

With regard to external factors such as the Greek financial crisis that might cause negative impacts on the Indonesian economy, Agus said that Indonesia had quite different economic conditions from those of Greece and other EU countries.

Indonesia’s debts, for example, accounted for only 28 percent of its Gross Domestic Product (GDP), far lower the debt to GDP ratios of European countries which mostly exceeded 120 percent, he said.

“With these high debt to GDP ratios, the state budget deficits of many European countries could reach 12 percent. This is much higher than 2.1 percent in Indonesia,” he said.

Agus’s presence during the House’s plenary meeting was his first as finance minister. In his first such encounter, Agus seemed relieved at the absence of the interruptions and hostile questions often experienced by his predecessor. Some House members had been hostile to Sri Mulyani due her policy role when the government decided to bail out Bank Century, which they claimed had led to legal violations.

At the meeting, Agus was accompanied by Deputy Minister Anny, secretary-general Mulia P. Nasution, Director General of Debt Management Rahmat Waluyanto, Director General of Treasury Herry Purnomo and several senior officials.

All factions in the House during the plenary meeting accepted the 2011 state budget proposal.

Nevertheless some of the House factions such as the Democratic Party for Struggle (PDI-P) demanded that government make cuts to reduce the proposed budget deficit.

The Golkar Party faction suggested increasing the economic growth target to 6.6 percent from between 6.2 and 6.4 percent, and an increase in the crude oil production lifting assumption from 900,000 barrels per day (bpd) as proposed by the government to 1 million bpd, despite some production problems.

Meanwhile, the United Development Party (PPP) faction asked the government to make concrete efforts to help reduce lending rates in order to help spur economic growth.

The Prosperous Justice Party (PKS) faction asked the government to propose and implement clear programs to reduce poverty and unemployment rates.

Agus is slated to attend another plenary meeting of the House on June 1 to respond the House’s members’ proposals for changes in the state budget bill.

“We are happy because all the factions have agreed to accept the draft budget. So, we will come back to this forum on June 1 to convey the government’s responses,” he said. (ebf)