Parliament Approves $6bn Stimulus Package

JAKARTA ~ The national parliament has approved a US$6-billion stimulus package to protect Southeast Asia’s largest economy from the worst of the global economic crisis, lawmakers said.

The parliamentary budget committee approved the plan worth Rp73.3 trillion ($6.15 billion) late on Tuesday after weeks of debate, amid a rash of bad economic news from some of Asia’s major economies.

“We approved the stimulus in accordance with the government’s efforts to overcome the effects of the global slump,” committee deputy chairman Suharso Monoarfa said on Wednesday.

“We hope that the stimulus can prevent rising unemployment, sustain consumer spending capability and strengthen businesses.”

Japan posted a record trade deficit on Wednesday and Hong Kong said its economy would shrink by up to three percent in 2009 but regional stock markets were generally higher as investors cheered a Wall Street rally.

Indonesia’s economy has slowed due to falling commodity prices and plunging demand for its exports from major buyers such as Japan and the United States.

Even so, the mainly Muslim country of 234 million people is still hoping to post growth of 4.5 percent in 2009, down from a previous forecast of 6 percent.

The central bank has been tapping its foreign currency reserves to prop up the rupiah, which has sunk to around 11,500 to the dollar this year compared to an earlier forecast of 9,400.

The stimulus, which will take effect from March, consists of Rp56.3 trillion of tax incentives and Rp17 trillion in additional government spending and subsidies designed to boost demand, production and jobs.

Its success or failure could be crucial to the political fortunes of President Susilo Bambang Yudhoyono as he seeks reelection in July, after parliamentary polls in April.

“The approval for the fiscal stimulus is important progress and hopefully will benefit the people,” Finance Minister Sri Mulyani Indrawati told reporters.

“We’ll finish working on all the documents within the next five days. We hope that the legal backing will be available in early March.”

Monoarfa said the government could withdraw Rp44.5 trillion of $6 billion in standby loan arrangements it has secured to help fund the budget.

The government earlier this year secured the standby loans with bilateral and multilateral lenders including the Asian Development Bank and the governments of Australia and Japan.

Development Planning Minister Paskah Suzetta expected the spending and incentives plan to create millions of new jobs to boost the mainstay of the Indonesian economy – domestic demand.

The unemployment rate is estimated at 8.4 percent compared to 8.7 percent in 2008, according to International Labour Organisation, but this is expected to rise.

“It is estimated that (the stimulus) could absorb three million workers. Especially with the extra fiscal stimulus of Rp2 trillion,” Suzetta said.

The package is expected to hike the 2009 state budget deficit from Rp51.3 trillion to Rp139.5 trillion, or from one percent of gross domestic product to 2.5 percent.

The government plans to issue a net Rp54.7 trillion of various types of bonds this year, which will help funding the deficit.

Filed under: The Nation

One Response to “Parliament Approves $6bn Stimulus Package”

  1. Regena Pasquel Says:

    As soon as China and the few others resolve to stop propping the dollar up and no longer purchase our treasuries we’ll default in no time. Our debt is unworkable to pay back (especially with our current fiscal policies) and China, Japan and the Saudis acknowledge this. They too recognize that dumping the dollar would hurt them in a major way, hence the grudging reinforcement for the dollar. This will stop at one point and we’ll be in enormous trouble. We are the most significant debtor country in the world!