Misleading statements on the economy

Minister of finance Jusuf Anwar considered more than twice oversubscribed of government bonds offered internationally as a success. The Jakarta Post lauded and regarded the situation as patience does pay. In fact this is not a result of patience in the government side. The overwhelming demand was merely a result of higher coupon offered in the US$1 billion sovereign bond, meaning we have to carry more burdens.

Jusuf said that the 10-year bonds carried a coupon rate of 7.25 percent and a yield-to-maturity (which is an effective interest rate that the government has to pay to investors or bond holders) of 7.375 percent.

With such a yield, the bonds will have a spread of 302 basis points -- or 3.02 percent -- above the 10-year U.S. Treasury bonds, which currently carry a yield of 4.36 percent. It is also higher than the 6.85 percent yield on the $1 billion worth of 10-year global bonds the government sold March last year.

Market analysts have said that the ideal spread for Indonesia's global bonds should be somewhere around 2 percent, making it still attractive for investors but not too costly for the government.

In the last few days, some key economic ministers offered brighter picture of the economy. Look at Sri Mulyani (Bappenas chairwoman) who said this year economy will grow by 6%, higher than previous projection of 5.5%.

We should ask if the economy is better than last year, why then we issued the bond with higher interest, which reflects higher risk?

In my opinion, the economy is actually worse than last year. Look at rupiah value. Last week it traded at Rp9,535 per US dollar, which is 11.3% decrease from 12 months ago.

Our foreign reserves were US$37.4 billion in April 2004 and US$36 billion this month. Interest rates also on the move to higher levels. CPI is already above 3% in the first three months and 8.81% year on year (as of end of March).

Commenting on rupiah, chief economy minister Aburizal Bakrie simply said government is not comfortable with current depreciation and that Rp9,000 per US dollar is the best value. The full impact of rupiah depreciation and higher fuel prices could lead to higher CPI this year and weakening our currency even further.

The recent survey conducted by Bank Indonesia confirmed the worsening expectation of consumers shown by significant drop of consumer confidence index (CCI) to 91.9 from 120.4 in November 2004. Any CCI below 100 means consumers are pessimistic on the economy now and the future (at least for the next six months).

So, stop mislead people. Just work hard and create better policies.

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