Roundup: former finance minister's possible return to cabinet widely welcomed

Local analysts and the market have welcomed the likely comeback of former minister of finance Boediono to the Indonesian cabinet's economic team.

His proven track record as the architect of the country's return to a brief period of macroeconomic stability after the 1997 financial crisis was just what the beleaguered economy needed, the Jakarta Post on Saturday quoted the analysts as saying.

Markets also greeted the news positively, with the Jakarta Stock Exchange Composite Index rising by as much as 2.1 percent to 1,119.417 on Friday and the rupiah strengthening to 10,005 rupiahs against the US dollar, from Thursday's 10,033.

The currency even rallied to an intraday high of 9,990 rupiahs to the dollar, after President Susilo Bambang Yudhoyono announced on Friday in Medan, North Sumatra, he had invited Boediono to join his Cabinet's economics team, as part of a "limited reshuffle" to put the recently unsatisfactory macroeconomic management back on track.

If Boediono joined the economics team, the economy would have a greater chance of picking up as he was known for his successful maintenance of fiscal stability during his term, said economist Kahlil Rowter of Mandiri Sekuritas.

"He is well respected in economic circles -- both in the country and abroad -- for his calm and careful attitude in getting things accomplished," he said.

Standard Chartered economist Fauzi Ichsan, meanwhile, emphasized Boediono's extensive experience, notably "in working together with the central bank and House of Representatives".

Boediono, who served as finance minister from 2002 to 2004, was credited for having been able to consistently reduce the state budget deficit, working with the central bank in maintaining macroeconomic stability in terms of inflation and interest rates, and delivering Indonesia out of an International Monetary Fund ( IMF) program.

Before becoming finance minister, Boediono had served as head of the National Development Planning Agency (Bappenas) and Bank Indonesia (BI) deputy governor.

Kahlil, however, suggested that Boediono should serve as finance minister, considering his track record, rather than as coordinating minister for the economy.

"I think his experience as chief economics minister would be questionable, especially when the real sector currently needs breakthrough policies, while Boediono is known for being a careful policymaker," he said.

Meanwhile, Fauzi warned of a possible negative market reaction if it turned out Boediono was not appointed finance minister or chief economics minister as has been expected.

"Boediono must be given strong fiscal authority. Some in the market have even suggested him for both (finance and economics minister)," he said.

Indonesia's economy recently experienced a growth slow down to 5.34 percent, amid an inflation reaching 18.38 percent and interest rates of 12.25 percent, after the government increased domestic fuel prices on Oct. 1 as soaring global oil prices threatened the state budget's sustainability.

Source: Xinhua



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