chronology
Sweta
Chaman Saxena
1997:
April 7-13: (TE) Situation Vacant: The great Asian property bust: Commercial vacancy rates in Jakarta are 13.7% and climbing. A fifth of all bank lending is directed to the property sector, which is starting to give bank regulators heartburn.
Survey of banking in Emerging markets: Asia’s fall from grace: The next crises are already rumbling.
New crises, new rules: The rich world’s central bankers want common standards to help emerging economies deal with their banking crises. Help is certainly needed.
April 28-May 4 - (TE) Losing the Midas touch: Prospecting in Indonesia
May 12-18 - (BW) Suharto’s Dilemma: He must move toward democracy or risk massive social unrest. Suharto’s picture of bringing in modernization is tainted by his corrupt and nepotic behavior.
May 19-25 - (TE) The Baht spills over: South-east Asia: Thailand’s once vibrant economy is sick. Its neighbors are worrying that the disease may be contagious. The jitters in Indonesia were combined with street violence surrounding the election campaign, and local banks were instructed not to provide foreign "speculators" with domestic currency.
June 2-8 - (FEER) Indonesia seemed far from crisis, unlike the neighbor Thailand, with trade surplus of $964 million in February, huge foreign exchange reserves of $20.4 billion in April, and good banking sector, with non-performing loans around $4 billion. Inflation was low. Attractive lending yields from Rupiah led to a slight depreciation of 3.2%, instead of the targeted 4-5% to aid exports.
June 9-15 - (BW) Growth Not Greed, Mr. Suharto ! Despite a sound fiscal and monetary management, combined with sophisticated floating currency, and low inflation, which gave Indonesia an edge over Thailand, the trickle down was little from all the economic growth because of the investment being concentrated among Suharto’s family and friends. This nepotism was tainting the reputation of Indonesia as a center for Japanese, American and European investment.
Suharto Capitalism: Will the growth engine he built survive the strains of his final years in power? There is mass resentment over Suharto’s autocratic rule, which bred red-tapism, bribery and corruption.
June 16-22- (FEER) No meddling! Jakarta sends Washington a sharp defence-linked message
Japanese trading giant Sumitomo unveiled plans to build a $640 million coal-fired thermal power plant near Jakarta with Powergen of Britain and other partners. Sumitomo will invst $24 million for a 15% stake in the 450,000 KW project. Toshiba and U.S. based Combustion energy ABB will supply equipment. This is Sumitomo’s first venture into Asia’s power sector.
June 30- July 6 - (BW) The currency crisis sweeping South-east Asia: Devaluation in one country after another may rein in growth.
July 7-13 - (Reuter) The Rupiah starts to crumble. Jakarta widens its Rupiah trading band to12% from 8%.
July 21-27 - (Reuter) Asian currency meltdown. The Rupiah, Baht, Ringgit and Peso all slump as confidence in the region rapidly deteriorates.
August 11-17 - (Reuter) Jakarta abolishes system of a managed exchange rate. The Rupiah sinks further.
September 29-October 5: (Reuter) The Rupiah saw a historic low of 3845 against the dollar, which was due to :
The Jakarta Stock Market too saw a low of 515.477.
Bank Indonesia announced new export facilities including arrangements for swaps and forward purchases for registered exporters
The Indonesia government announced it planned to unveil tough new reinsurance rules by the end of the year aimed at bolstering the financial security of the domestic insurance industry. The new rules could take effect on January 1st 1998.
October 6-12 - (Reuter) Indonesia contemplates approaching the International Monetary Fund (IMF) for financial assistance.
(FEER) Indonesia: No laughing matter : Stock market index sliding down from 700 in early August to 500; GDP target growth rates at 7.8 % and 8.1% for 1997 and 1998 slipping down to as low as 5.5% and 5%; Inflation expected to be in double-digits from 5% in early 1997; Current account deficit projection was raised from 4% of GDP to 5%
October 13-19 - (Reuter) Japan’s readiness to give technical and financial assistance to Indonesia boosts the Jakarta Stock Index by 0.7% (at 520.7 from a previous close of 517.1) and the Rupiah by 2.7% (at 3570 Rupiah to a dollar from it’s previous close of 3,665). The central bank works towards defending the Rupiah against the dollar. This Japanese aid was, though, conditional on IMF package.
October 20-26 - (Reuter) Jakarta stocks closed lower with heavy selling, following the full fall in Hong Kong. The main index ended on Friday down 2.2 percent, or 11.1 points, at 494.1 from a previous close of 505.23.
The Rupiah continued to weaken against the U.S. dollar (with a final close at 3585) due to contagion from the neighboring countries and also because of low interest rates (for easing liquidity)..
To ease liquidity, Bank Indonesia decided to reopen its short-term securities (SBPUs) and rediscount facilities for the first time since August 19. Short-term SBI interest rates were reduced by 100 basis points across the board. The average overnight interbank rate declined by 180 basis points, to 39.19 %.
However, results from negotiations with IMF were still awaited. Singapore Prime Minister Goh Chok Tong was ready to supplement the IMF's efforts toward restoring investor confidence in Indonesia, while Australian government seemed unlikely to directly contribute to the joint-IMF-World Bank-ADB assistance package. Despite all this upheaval, president Suharto is optimistic about the strength of the Indonesian economic fundamentals to cope with the crisis and to restore public confidence.
Bank Indonesia limited the selling of its SBI notes to a maximum of 5 billion Rupiah per bank to maintain good liquidity in the system.
(FEER) Feeling the pain: Indonesia’s currency crisis hits the man on the street .
Default Option: Indonesia and the IMF count the cost of the Rupiah’s slide.
October 27-November 2 - (Reuter) Jakarta Stock Exchange shows improvement, so does the Rupiah (closing at 3590) first as Malaysia agrees to give $1 billion to Indonesia, while Singapore pledged $10 billion to Indonesia to help stabilize the Rupiah, and Japan and Australia show their interest in supporting Indonesia to tide over her currency crisis, conditional on the IMF rescue package; and then as the government reveals successful negotiations with the IMF for a $40 billion in aid, with a front line defense of $23 billion. The package includes fiscal and banking reform, improved budget discipline, reduction of import tariffs and export obstacles, deregulation of agricultural commodities and efforts to rein in inflation.
U.S. committed a "second line of defense for Indonesia" after the IMF financial package and those from "other countries are involved" are settled at.
The ADB agreed to grant a total assistance of $3.5 billion to Indonesia between 1998 and 2000.
One of the IMF conditionalities was to appoint a senior government official Wardijasa to the board of Timor Putra and to take over from Hutomo Mandala Putra, President Suharto’s youngest son and the head of the company.
November 3-9 (Reuter) - IMF approves a $10 billion loan for Indonesia as part of the massive international package. Alongside, a coordinated intervention by Bank Indonesia, the Monetary Authority of Singapore and the Bank of Japan brought in tight liquidity and positive sentiments, which led to a strong Rupiah all week long (3290)
Jakarta stock market rose initially due to the announcement of deregulation measures to loosen imports and export controls and enhance the climate for foreign companies operating in Indonesia. There was liberalization of the import monopolies for wheat, wheat flour and soybeans; elimination of an administrative retail price for cement; expanding export facilities; and cutting import and export taxes.
However, the rumors that the Minister of Finance had resigned due to the legal action taken by Bank Andromeda, 25% owned by President Suharto’s second son Bambang Trihatmodjo, to reverse its closure (when his proposal to inject 350 billion Rupiah into the was rejected), State secretary Moerdiono issuing a statement that the government will maintain its decision to liquidate 16 privately owned banks, and the drop in other regional markets, particularly the Korean stock market, resulted in the fall of the stock market considerably.
Liquidity in the inter-bank market was tight (starting from 40% and closing at 57.2%). Bank Indonesia provided steady liquidity while banks are keeping ample funds to prepare for any unexpected fall-out from the liquidation of the 16 insolvent banks.
Consumer price index inflation rose to 8.8 percent in October 1997. The trade balance for nonoil/gas sectors improved in September. During January -September 1997, total imports decline 3.4% while exports increased 15.3%, with respect to the same period in 1996.
November 10-16 - (Reuter) The Rupiah was maintaining strong against the dollar initially, but declined to 3,365 to the dollar because of negative comments by Moody’s on Indonesia’s long-term debt. Despite moderate intervention by Bank Indonesia, Bank of Japan, and the Monetary Authority of Singapore to prevent the Rupiah from falling below 3400 against the dollar, it closed at 3440 on Friday.
Jakarta stocks went down due to regional weakness, due to announcements of poor corporate results, and because of a run on Indonesia's largest unlisted privately-owned bank, Bank Central Asia (BCA). But it was saved by the withdrawal of a lawsuit by a liquidated bank (Bank Andromeda) co-owned by President Suharto's second son.
Indonesia's consumer price index rose 1.99 percent month-on-month in October, compared with an increase of 1.29 percent in September. Year-on-year inflation now stands at 8.48 percent compared to 6.9 percent in September.
Interbank interest rates continued to diverge markedly between the top tier banks, who are experiencing better liquidity conditions, and second and third-tier banks which continue to face tight conditions. The divergence rates for top tier banks eased to 15% while other banks are still paying nearer 50% reflects continued market segmentation. However, the week closed at an average inter-bank rate of around 43%.
Customers of the 16 liquidated private banks flocked to their branches throughout the country as well as to state banks appointed to payout their deposits up to Rupiah 20 million per depositor.
The Asian Development Bank’s board approved a $130 million loan to help enhance the productivity of Indonesia's agricultural sector. The total project cost is $217 million, out of which $83.9 million would be borne by the Indonesian government and $3.1 by the farmers' groups. The loan is repayable over 26 years including a grace period of six years.
November 17-23 - (REER) At the end of the week, Indonesia's exchange rate and stock market were sharply lower, due to concern over the South Korean won and a general lack of investor confidence in the region. The composite stock index fell 1.23% to 391.26 points, down 10% on the week. The Rupiah ended the day in Jakarta at 3,612 against the dollar after touching a low of 3,635 before the central bank intervened. Investors have lowered their profit forecasts for corporates because of higher interest rates, higher external debt service and lower economic growth.
Indonesia produced crude oil at its OPEC quota level of 1.33 million barrels-per-day (bpd) but had spare capacity to produce more if its quota was increased.
Inter-bank markets began pretty liquid, again with first tier bank paying around 14.5% and second- and third-tier banks paying higher. The average rate was kept relatively stable around 38 percent. However, later in the week Jakarta interbank rates rose due to rises in short-dated swaps. Overnight JIBOR rates increased to 22%. Second-tier banks paid around 40 percent and third-tier banks were forced to pay even higher rates at 70%. SBI and SBPU rates were unchanged.
As the economic crisis was cutting real incomes and job opportunities, more Indonesians are likely to join ranks of poor, leading to political instability. The survey estimates that nearly 18 million people were expected to join the 23 million people living below the poverty line (with monthly per capita income of 38,246 Rupaih ($10.62) in cities and 27,413 Rupiah ($7.6) in villages).
The government was warned by the members of the Indonesian parliament to keep fuel prices at their present levels to avoid an additional burden on the people.
Finance Minister Mar'ie Muhammad forecasted a trade surplus of $4.3 billion in the second half of the 1997/98 fiscal year, which would imply a total trade surplus of over $9.0 billion in the current fiscal year, while the Planning Minister Ginanjar Kartasasmita expected economic growth to slow down to between 5.0-6.0 percent in the fiscal years 1997/98 and 1998/1999, and the current account deficit to be kept below 3 percent of GDP in the next two years.
According to the Finance Minister, the government did not plan to reschedule its foreign debt and continued its policy of early repayment of foreign debt since this policy will increase market confidence on Indonesia. He ruled out bailout of private companies in distress.
(BW) It’s the most complex financial bailout ever, with a price tag of more than $100 billion. At stake: Global economic health !! The cost to Indonesia : $40 billion: Suharto regime agreed to shut down banks, break up government monopolies, and dilute the interest of ruling families and its cronies to get IMF package.
November 24-30 -(Reuter) The week began with a strong Rupiah, but the central bank intervened in the middle of the week (by selling dollars) to stabilize the Rupiah at 3,640/60. Similarly, the stock market began on a high note as the president had instructed the monetary authorities to use the US$5 billion standby loan from Singapore to improve low-interest credits to medium and large companies, but later saw a low because investors sold shares across the board as the Tokyo market crash pushed regional markets into a new wave of selling. In the interbank market, the average overnight rate was relatively stable at 41.2%.
To top the economic crisis, there was an earthquake in northern part of Indonesia’s Sulawesi, measuring 6.8 on the Richter scale, damaging at least 90 buildings.
Indonesia's central bank governor Sudradjad Djiwandono reported that the property sector's total outstanding loans of 74.2 trillion Rupiah in August, accounted for 19 % of total outstanding loans in the economy. Also 1.5 % of the 74.2 trillion Rupiah loans was considered bad debt.
President Suharto's second son, Bambang Trihatmodjo and second daughter Siti Hediati Prabowo have acquired Bank Alfa, after two banks in which they had stakes were liquidated on November 1.
There was confusion about Indonesia being able to draw on a promised $5 billion loan from Singapore, which was a back up plan, in case the other loans were exhausted. Of the total loan of $10 billion, $5 billion was supposed to be used for exchange rate stabilization and the rest to support the BOP.
December 1 -7 -(Reuter) The week saw the weakening of the Rupiah (3960 Rp/$, with the central bank intervention preventing it to fall below 4000) because of strong demand for dollar by the corporates, and fall in the South Korean won and the Japanese yen.
For the first three days, the stock market fell sharply because of sliding Rupiah, concern over the health of the banking system and because foreign investors were taking losses and liquidating their positions. However, the last two days saw an improvement because of the announcement of the IMF package for South Korea and because of the purchases made by state-owned enterprises.
Bank Indonesia used open market operations to raise overnight interest rates to prevent the slide of the Rupiah. In the interbank market the average rate remained stable around 37 percent. The overnight JIBOR rate was around 22 percent.
$20 million loan was approved by the World bank to help Indonesia improve the structure and soundness of its banking system.
Indonesian conglomerate PT Bakrie & Brothers suffered foreign exchange losses of 123 billion Rupiah in the first nine months of 1997.
Oil prices are expected to go down as OPEC decides to increase the group’s output ceiling by almost 10 percent.
CPI rose 1.65 percent in November over October and 9.01 percent over November 96 due to an increase in food and housing prices. President Suharto said state commodities regulator BULOG would supply more rice into the market to stabilize prices.
December 8-14 -(Reuter) The Rupiah declined from 4142 at the beginning of the week to 5055 at the end of the week due to concern over President Suharto’s health, in addition to the contagion from the weak neighbors. Liquidity in the interbank market had been tightened to prevent fall of the Rupiah.
The stock market improved at the beginning of the week as stocks looked cheap with Rupiah falling and as downside risks were limited. However, after three days of rise, the stock market fell sharply because of the President’s ill health.
The fire at the top storey of Bank Indonesia’s office tower in Central Jakarta killed 14 and destroyed property worth millions of dollars.
Indonesian government and business officials are scheduled to travel to Washington and New York next week to help renew confidence in the troubled economy.
The ADB approved a total of $240 million in cheap loans for infrastructure improvement in Indonesia.
International economist Rudiger Dornbusch thought that "for the most part the crisis is over". Now the next thing to do is to decrease interest rates.
The famine in the Inrian Jaya took the death toll to 554 people.
December 15-21 -(Reuter) After an initial decline to 5800 as a result of president Suharto’s ill health, Rupiah stabilized at 5200 against the dollar at the end of the week, reflecting optimism about intervention from Bank Indonesia, together with the Monetary Authority of Singapore and the Bank of Japan (BOJ) after the successful BOJ intervention in boosting the yen against the U.S. currency.
After a day of decline in stock market, the index improved over the rest of the week following the appearance of President Suharto in public after two-weeks rest.
Liquidity remained tight in the interbank market, the average rate remaining relatively stable at around 45% and the JIBOR rate around 33.2%.
The severe drought leading to a famine spreads to Moluccas region, endangering 80,000 people.
A credit watch was placed on Bank Negara Indonesia, Bank Danamon Indonesia, Bank Internasional Indonesia and Bank Umum Nasional by the S&P because of deteriorating asset quality of banks, bubble in property market and growing non-performing loans.
Indonesia's CPI rose 1.65% month-on-month in November, compared with an increase of 1.99% in October. November's inflation was boosted by a sharp 3.36 percent monthly increase in food prices. Year-on-year inflation in November was 9.56 percent, compared with 8.48 percent in October.
Indonesia will impose an additional export tax of between 28 and 30 percent—temporarily for six months on palm oil, effective December 19, on producers who fail to supply 80 percent of their output to the local market. Crude palm oil is currently subject to an export tax of 5%, palm olein 2%, and crude olein and RBD palm oil 4% each.
December 22-28 -(Reuter) The Rupiah plunged to a low of 5950 as a result of falling South Korean Won, leading to an increase in short-term debt. However, the stock market remained steady around 397, ignoring downgraded Moody’s ratings (Bonds from Ba1 to Baa3 and bank deposits from Ba1 to Ba3).
Four central bank directors: Hendrobudiyanto, Heru Soepraptomo, Mansjurdin Nurdin and Paul Soetopo (head of Foreign Exchange) are replaced by Iwan Prawiranata, Sjahril Sabirin, Miranda Gultom and Aulia Pohan.
Indonesia's National Logistics Agency, Bulog, imports rice from Thailand, Vietnam, Pakistan, India and China to fight the growing demand and higher prices due to the drought. 50,000 tonnes of rice has already been imported, while another 100,000 tonnes is expected by the end of December.
Indonesia plans to attract new capital inflows by issuing U.S. dollar denominated bonds and having large conglomerates repatriate foreign currency holdings abroad. President Suharto plans to issue new foreign currency bonds at a meeting with 57 conglomerate chiefs this week.
Indonesia introduces a new excise tax structure for alcoholic beverages (effective from January) to limit liquor consumption and because of the rising inflation following the currency crisis.
December 29- January 4, 1998 - (Reuter) The Rupiah appreciated to 4,950 per U.S. dollar, with the help of central bank, at the end of the week. The stock market too ended up on a high note (above 400).
The Jakarta State Administrative Court ordered the Finance Ministry to postpone the implementation of its November 1 decree closing Bank Jakarta until the suit was decided.
Three former Bank Indonesia directors were interrogated about alleged acts of corruption at the central bank.
Indonesia's foreign debt stands at $118 billion while additional debt from commercial paper was $15.3 billion.
The government considers raising the minimum wages in Indonesia, following the crisis. The minimum wages were raised by an average of 10.07% since April 1st, 1997.
1998:
January 5-11 - (Reuter) The Rupiah breaks through the 10,000 level and the stock market plunges, as the government announces its budget for 1998/99, which was not considered tough enough to abide by the IMF recommendations and because of the possibility of the debt moratorium. Hence the President comes under international pressures to stick to the IMF conditionalities. He announces the delay or review of 15 big infrastructure projects. IMF Deputy Managing Director Stanley Fischer arrives in Jakarta to discuss implementation of IMF’s programs.
Following are highlights of Indonesia's 1998/99 (April-March) state budget:
The credit rating of the long-term foreign currency was downgraded to BB from BB+ by S&P, and to BB- from BB+ by Fitch IBCA
January 12-18 - (Reuter) IMF Managing Director Michael Camdessus meets with President Suharto and signs an agreement to strengthen economic reforms. President Suharto announced a cut in fuel subsidies; revisions of the 1998/9 budget which assumes a 20 percent inflation rate, zero G.P.P. growth and an exchange rate of 5000 rupiah to the dollar; and elimination of tax benefits under the national car project.
The agreement also included the scrapping from February 1 of state monopolies on importing and distributing sugar and distributing wheat flour. The new IMF program intends to free up agricultural markets, cut tariffs, encourage foreign investment and eliminate state monopolies except for rice (BULOG).
Angry by the rising prices, people mobbed the shops in East Java.
Bank Indonesia announced that the country's gross foreign assets were at $20.39 billion as of January 15, equivalent to five months of imports, excepting gas and oil.
January 19-25 - (Reuter) The Rupiah hits 12,000 on Wednesday as the news spread that the corporates were to pay dollar debts in Rupiah. Then it reaches a record low of 17,000 on Thursday as the news about Research and Technology Minister Habibie being a preferred vice-presidential candidate spreads (who is considered a profligate and would not stick with IMF’s conservative budget measures). However, intervention by bank Indonesia pulls the Rupiah to 11,800. The Rupiah ends at 12,000 on Friday, after a revised version of the budget was presented, which showed adherence to the IMF policies.
January 26-February 1 -(Reuter) Indonesia announces a temporary freeze on debt servicing but emphasised that it is not a moratorium as companies with the dollars can pay their creditors. It also announces banking reforms, whereby the government will guarantee the security of both depositors and creditors. As a result of these reforms and central bank intervention, Rupiah strengthened to 10325 against the dollar.
S&P rating of Indonesia’s long-term foreign currency rating to B from BB and local currency rating to BB- from BBB. It also downgraded the ratings of 8 Indonesian’s banks and put 19 corporations on credit-watch. However, the stock market survived this downgradation and went up by 2.1%.
Japan pledges a loan of $560 million to Indonesia, while the news that IMF’s APD’s chief is willing to pay $3 billion right away to help fight the economic crisis.
Another agitation to show frustration against the crisis. This time Islamic school students attacked shops and houses in two small Central Java coastal towns.
February 2-8- (Reuter) The Rupiah appreciated compared to last week (mildly because of up-trend in regional currencies), but depreciated to 9400 against the dollar despite the intervention by the Central bank and the news that joint venture companies accounted for almost half of Indonesia's private foreign debts. However, the stock market picked up as a result of economic and banking reforms.
Singapore proposes a multilateral system of guarantees for Indonesian letters of credit. Thai shipment of rice to BULOG was delayed because of Indonesia’s problems with letters of credit.
Indonesian government is not so enthusiastic about the currency board proposal by U.S. economist Steve Hanke, where the Rupiah would be pegged to another currency, most likely the U.S. dollar.
President Suharto does not name a running mate in the up coming elections in March, as it was not his right, but the right of parliamentary groups, to name the candidate.
The Word Bank agrees to give $1.0 billion this month, of which $400 million would go toward helping farmers provide food security, $300 million would be used to create work in existing urban infrastructure projects, and $300 million in support of jobs in rural areas.
As a part of banking reforms, the central bank proposes ceilings on growth in foreign exchange deposits, foreign exchange non-trade related liabilities, and foreign exchange trade related liabilities, including letters of credit, to avoid irregularities.
There was a trade surplus of $1,424.1 million in November, compared with $1,098.2 million in October. Bank Indonesia announced the country’s gross foreign assets at $19.06 billion in January, which is equivalent to 4.7 months of imports. The government expects 10% of work force to be unemployed by end of 1998. The government is expected to raise the farmgate rice price to 600 rupiah from 525 rupiah per kg. The month-on-month CPI rose 6.88 percent in January, compared with a rise of 2.04 percent in December. Indonesia’s total foreign debt stands at $137.424 billion.
A riot broke out in an East Java coastal town when rioters tried to burn down a shopping complex at a suburban market because of rising inflation, when police had to fire warning shots.
February 9-15 -(Reuter) There was a signature campaign to replace President Suharto, as there was discontentment over Suharto’s efforts to handle the economic crisis. Hence he signals adopting an approach to a fixed exchange rate system. The week begins with a strong Rupiah on the hope of having a fixed exchange rate. However, it gradually weakens as the IMF and D.C. oppose the currency board system and there is concern about the uncertainty over the next vice-president. The stock market plunged because of economic, political and social turmoil.
The government plans to subsidize the import of material to manufacture generic medicines and emergency equipment needs. The imports would be at 5000 Rp/$ and the rest would be subsidized.
More riots in east Indonesia lead to a curfew. Protests due to rising food prices in Jakarta lead to detainment of over 250 people. The riots in West Java town was considered by Suharto as a plot to destabilize the government. Angry mobs looted or burnt shops in eastern and central Java and on islands of Sumbawa, Flores and Sulawesi.
The ruling Golkar party declares Habibie and parliamentary speaker Harmoko as its vice presidential candidates
Indonesia imposed an indefinite ban on crude palm oil exports, justifying it as being in line with GATT and as a measure to stabilize the domestic cooking oil prices, although it was clashing with its agreement with the IMF.
February 16-22- (WSJ) Finance Minister Mar'ie Muhammad says Indonesia so far faced no problem in meeting state foreign debts, while telling parliament that the government wants to maintain good ties with the IMF. Mar'ie says Suharto had instructed the finance ministry and the Central Bank to prepare for the introduction of a currency board by taking into consideration all views and development, locally and abroad.
Police brace for further unrest in Sulawesi island as no clear picture is seen on how the government would stabilise the Rupiah. Fear of unrest grows in Indonesian City: Once-thriving Surabaya faces joblessness and inflation.
(Reuter) Parliamentary speaker Harmono steps down from the vice-presidential rat race to let Habibie take over, who had been supported by the Moslem-backed United Development Party. Habibie is assured of the vice presidency.
Central bank governor Djiwandono is fired by Suharto for opposing the currency board. Sabirin replaces him.
Rising riot incidents as a result of rising food prices, leads to the shoot at sight orders.
Germany agrees to give 373 million marks ($205.3 million) in financial aid. But feels that Indonesia should abide by IMF prescriptions. Chinese shop keepers sold commodities at discounts to Javanese poor who had rioted earlier this week with Chinese stores, their main target. China feels that Indonesia could deal with ethnic unity and the crisis. Singapore agrees to pay $2billion if Indonesia if its plan for international guarantees for Indonesian letters of credit is implemented.
Continuing on its stand that currency board was premature for Indonesia, IMF softened by emphasizing that it should be preceded by banking reforms, corporate debt and other economic issues.
To restore falling confidence among Indonesians in their government, Suharto guaranteed a pay-out on all legal deposits in 16 banks liquidated last year, which would amount to 1.7 trillion Rupiah.
Indonesia plans to set up 80 fish flour plants worth 800 billion rupiah to reduce the price of animal feed on the local market
The Rupiah appreciated to 8800, as the news spreads that India might drop the currency board proposal.
February 23-March 1- (WSJ) Concern Grows over Indonesia’s Clove Market: trade Monopoly would continue, which means backtracking on another term of its IMF bailout.
As social unrest grows in Indonesia (effects of drought from last year, high unemployment and soaring food prices), neighbors (Malaysia and Indonesia) fear an Indonesian exodus.
Some technocrats and leading economists have met with IMF officials to find solution for this social unrest. The currency board system has been opposed and a new two-tiered currency regime has been proposed to IMFspecial envoy Prabhakar Navekar; which is what the country had between 1968 and 1970. According to this regime, the price basic commodities would be determined by the stronger edge of the Rupiah (9000+) while the rest of the transactions would be done on open market. However, IMF looks at it as a "radical" approach.
(WSJ) Barring a surprise, President Suharto will be re-elected for the seventh term on March 10th, 1998.
(Reuter) The Rupiah and the stock market showed a mixed trend as investors adopt a wait-and-see attitude due to uncertainties over the implementation of currency board system , the coming presidential election and a meeting of ASEAN finance ministers
Finance Ministers of G7 countries are against the currency board system for Indonesia. Export Credit Agencies from G7 agreed to finance trade to stabilize the Asian economies.
Australia contemplates providing emergency food aid program to ease riots over food shortages and rising prices.
IMF team visits Jakarta to evaluate the progress on economic reforms so that the fund could approve the next disbursement from a bail-out program. Navekar feels that the country is trying to abide by the IMF policies.
Non-problem loans stood at 91.82 percent of all loans by state and private banks at the end of October 1997. The country’s foreign debt stands at $136.1 billion as of December 31.
Four airlines Bouraq Indonesia Airlines, Deraya Air Service, Mandala Airlines and Sempati Air are in serious danger of shutting down due to huge losses.
Philippine approves the donation of 1 million U.S. dollar worth of medicine to Indonesia which has been suffering severely under the currency crisis.
The ban on the export of crude palm oil and its by-products, except for stearin and palm kernel oil , was emphasized again.
Bank Indonesia contemplates providing special credit to help about 6,000 financially troubled poultry farmers. The consumption of Indonesia’s poultry meat fell 25% in last quarter of 1997, and expected to drop another 25% in the first quarter of 1998 due to the Asian crisis and the falling Rupiah.
March 2-8- (Reuter) President Suharto, in his address to the Indonesian People’s Consulative Assembly, proposes to go ahead with the currency board system, conditional on approval by the IMF.
The Rupiah initially strengthened in response to government reform package, but later weakened because of the possibility of temporary introduction of Currency Board and the rumor of delay in IMF disbursement. The stock market remained low too.
The monthly CPI rose by 12.8 percent in February. Annual inflation since last February is 31.7%. Increase in food prices was 16.1% in February and 46.9% since last February.
Bank Indonesia’s gross foreign assets stand at $16.33 billion at the end of February, euivalent to 4 month of non-oil imports.
Head of Indonesian Bank Restructuring Agency, Subianto, is dismissed officially, while Bank Indonesia Director Boediono, who opposed the currency board, was officially replaced.
Japan again proposes a scheme under which the Indonesian government or Bank Indonesia guarantees the repayment of private sector foreign debt, which could reduce the debt burden by up to 30 percent.
The exemption of further 15,000 cars from import duties -- imported from Korea and labeled the Timor—was justified as a commitment before the commitment to the IMF to cease such exemptions. The BULOG, however, would be bereft of all its import monopolies other than that for rice.
March 9-15 -(WSJ) Indonesia’s confrontation with the IMF deepened, as the fund postponed the next $3billion tranche of its bailout package until at least April, which had been scheduled for March 11. Meanwhile, a big Indonesian bank faces seizure currency-related losses.
Foreign reserves have fallen 24% since the beginning of the year.
IMF agrees to accept the currency board in Indonesia after all, to defuse the recent tension in Jakarta, as President Suharto begins his 4th decade as the president. Habibie is elected the vice-president.
Suharto likely to name Mohammad Hasan to the cabinet as the new Industry and Trade Minister. He heads the plywood industry monopoly that the IMF ordered disbanned as a condition of the $43 billion bailout. This appointment is read as further evidence that the reforms agreed to with the IMF won’t be fully implemented.
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This page was last revised on September 09, 1998.