| Abstraksi Narasi |
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It was announced on the evening of Friday, 12 September that the rupiah was to be devalued from Rp i,i34 to Rp 1,644 to the US$, this being interpreted as a 45% devaluation by the Indonesian press and a 31% devaluation in the foreign media. The move caught almost everyone by surprise, including apparently, many members of the cabinet. There had been little sign of acclererated capital outflow in the weeks before the announcement; indeed the Jakarta bourse had been very quiet since March, and the feeling was widespread that the Government would not undertake any dramatic new policy initiative until after the 1987 elections. Most observers were taken aback by both the timing and the magnitude of the exchange rate adjustment. But to to an even greater extent than in 1983 (and certainly than in 1978), the current and projected balance of payments situations justified the action taken. While the forecast current account deficit of about $4.5 billion in 1986/7 could have been financed by some reduction in reserves and increased foreign borrowing, the resulting increase in the debt- export ratio would almost certainly have reduced confidence in the international financial community to the point where Indonesia would probably have found it difficult to secure more loans, except on less favourable terms. Given the magnitude of the decline in Indonesia`s terms of trade during the first months of 1986, and the improbability of any significant early improvement in the world oil market, dratic steps were necessary to correct what was clearly a fundamental disequilibrium in the balance of payments. Until September 12 there were grounds for concern that the Government would resort increasingly to quantitative import controls; it also seemed that the 6 May Package (PAKEM) was not going to have any appreciable effect on non-oil exports in the short term. As it is, a devaluation of this magnitude is a clear signal that the Government has decided to give a major role to the price mechanism in bringing the balance of payments back into equilibrium.
However there is widespread recognition in Indonesia that, given the magnitude of the problems facing the economiy, much more than a devaluation is needed if the country is to achieve a sustainable rate of economic growth of around 5% per annum in the medium term. It will be necessary to tackle at source the import monopolies and other distortions that have created the high cost environment which has attracted so much criticism over the last two years. Although much of this critism has been directed at the industrial sector, problems of high costs and lack of international competitiveness now afflict many parts of the agricultural and service sectors as well. While the devaluation is a necessary first step towards correcting these problems, it will be essential to dismantle the complex structure of quantitative controls which are creating large rents for a few and disincentives for the great majority of producers of exportables and import-competing goods and services. Such measures are necessary to achieve efficient import substitution and promotion of non-oil exports, and to ensure that the impact of the devaluation on producers of tradeable goods will be sustained as long as possible. If the Government is not prepared to take these measures, but instead resorts to restrictive fiscal and monetary measures in an attempt to make the devaluation `stick`, there is real danger that the Indonesian economy will experience low growth and poor export performance for years to come.
This survey is in three parts. The first part provides a background to the devaluation by examining the growth performance of the economy over the last three years, the budgetary and balance of payments situation and current developments in money supply and prices. An attemp is also made to examine the impact of quantitative controls on prices of a range of importable and exportable , particularly in the agricultural sector, over the last few years in order to appreciate the likely impact of the devaluationon producer incentives. In the light of this discussion, the second part of the survey discusses the probable impact of the devaluation on non-oil exports and imports, on the budget, on the domestic price level, and on economic growth. This leads us finally to adiscussion of appropriate policy responses in order to ensure that the benefit of the 1986 devaluation on domestic resource allocation, and on the rate of economic growth, is as large and as sustained as the international economic situation allows. |
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