Gloomy economy to darken further on censure vote
The battered economy looks set to take a fresh hit this week as President Abdurrahman Wahid fights to save his political life in a key vote in parliament.
Legislators are today set to pass a second vote of censure against Mr Wahid for his alleged role in two financial scandals, paving the way for his eventual impeachment.
The move may trigger wide-scale unrest in the capital as thousands of the president's rural supporters, backed by a handful of so-called suicide squads, have flocked to Jakarta to defend his tenuous hold on power.
Economists say that if the latest showdown prompted a renewed outbreak of lawlessness and bloodshed, the rupiah would lose even more ground against the US dollar.
Last week, as tension mounted the currency breached 12,000 to to the dollar, levels last seen during the crisis of 1998 when former president Suharto was driven from office.
Further rupiah weakness would in turn frustrate the government's abortive efforts to rein in its budget deficit, potentially undermining the entire economy.
Jakarta remained calm yesterday with thousands of extra security personnel drafted in to quell any fighting between Wahid supporters and his detractors.
Most shops were closed and the streets largely deserted. Jakarta's Glodok Chinatown, the scene of vicious anti-Chinese rioting during the unrest against Suharto three years ago, was especially tense.
In the run-up to today's vote the crisis gripping the economy has deepened.
Despite throwing millions of US dollars into the foreign currency markets, Sjahril Sabirin, governor of the central Bank Indonesia has been unable to reverse the rupiah's slide.
He said the the local unit was 'very undervalued', and it could weaken further if the power struggle over the national leadership further undermined investors' minimal confidence in the country.
To aid the intervention, Bank Indonesia has jacked up the one-month SBI central bank certificate, the main benchmark interest rate, to more than 16 per cent. Analysts say that while the monetary squeeze has lent little support to the rupiah, it will hit many of Indonesia's debt-laden corporations hard.
Adding to the air of despondency, Jakarta has failed to patch up its relations with the International Monetary Fund. A US$5 billion loan programme has been on hold since last December amid disagreements over the pace and scope of economic reform.
A high-profile IMF delegation wrapped up a mission to Indonesia last week, having failed to break the deadlock over further disbursements.
Anoop Singh, the IMF's deputy-director for the Asia-Pacific region, issued a stark warning that fast-deteriorating conditions put the country's recovery at risk.
Mr Singh said the exchange rate was 'overly depreciated' despite higher interest rates. Inflation - running at 10 per cent last month - was also a growing concern.
In an address to the nation Mr Wahid all but admitted the economy was in a tailspin.
'Even if this nation had a 100 presidential changes, nobody could mend the economy,' he said in a television address read by a close adviser.