Indonesia budget fails to halt slide

The Indonesian government continued to flail helplessly in the face of economic meltdown, as a new budget announced yesterday failed to stop - or even to slow - the downward slide of its currency.

In Jakarta, the rupiah fell to 13,500 to the US dollar, down from 12,000 the previous afternoon, the fourth day in succession on which it has sunk to an a record low.

Indonesian money has lost close to nine-tenths of its value in six months, placing an unbearable burden on companies which have debts in foreign currencies.

Many independent analysts believe that most Indonesian companies, unable to match their rising loan repayments, are technically bankrupt.

The government's inability to influence the situation was emphasised when the announcement of a new budget did nothing to calm the currency markets.

A fortnight ago President Suharto provoked derision among international investors with an original budget which predicted economic growth as high as 4 per cent, inflation as low as 9 per cent and an exchange rate of 4,000 rupiah to the dollar.

Those targets were revised under pressure from the International Monetary Fund, which has promised $43bn (pounds 27bn) to bail out the Indonesian economy.

The finance minister, Marie Muhammad, predicted zero economic growth in the financial year for 1998 to 1999, an inflation rate of 20 per cent and an average rupiah rate of 5,000 to the dollar, all figures which have been approved by the IMF.

The currency markets seem to have completely lost confidence in President Suharto's regime, and a series of hopeful economic measures have failed to remedy the crisis. There was another protest in Jakarta by a group of demonstrators calling for President Suharto to reverse his decision to begin a seventh term in office in March.

- Richard Lloyd Parry, Malang