Economic Conditions and the Poverty Line

Article excerpt

Under Habibie, the Indonesian economy showed some improvement, particularly in the slowing of inflation and the stabilization of the rupiah vis-à-vis the U.S. dollar. When Habibie became Vice-President in March 1998, the rupiah plunged to Rp 17,000 per dollar. However, after Habibie was made President, he extended full co-operation to the IMF, resulting in the resumption of IMF assistance. The rupiah stabilized, then improved to Rp 8,000 per U.S. dollar by December 1998. Inflation also slowed. There was no shortage of basic food, at least in the short term.

The general performance of the Indonesian economy, however, was poor, contracting between 13 per cent and 15 per cent, the largest since Indonesia's independence. The banking system was not improved as a new bankruptcy law was not passed. Although Indonesia closed 16 banks considered insolvent and 54 banks were placed under the supervision of a restructuring agency, Indonesia still had to restructure private debts. The reform in the monetary system was slow. Without drastic reform in the political field, and a marked reduction in corruption, economic recovery is unlikely. …