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Indonesia: Sri Mulyani Says Fed Rate Hike will Not Affect Indonesia
Finance Minister Sri Mulyani that the domestic economy will not be affected by the Federal Reserve’s decision to increase its key interest rate or the Fed Fund Rate (FFR). The minister said Indonesia is among the world’s developing countries with the fastest growth of five percent.
According to Mulyani, some factors that will stand against the FFR hike impact include Indonesia’s low budget deficit of 2.7 percent and the maintained debt-to-GDP ratio of 28 percent.
“They are the foundation that differentiates Indonesia’s position compared to other developing nations,” she said in Jakarta Thursday, December 15.
The US central bank decided to raise its key interest rate by 25 bps to 0.75 percent. This is the FFR’s second increase in a span of ten years. With the hike, the United States is projecting an economic growth of more than two percent in 2017
Indonesia has anticipated the Fed’s decision by issuing US$3.5 billion worth of global bonds in the beginning of 2015 and two weeks ago, which the Finance Ministry’s director general for risk financing and management Robert Pakpahan said was appreciated by American investors.
The proceeds were used to pre-fund the 2017 State Budget, not to cover for this year’s budget deficit.
The FRR hike briefly pushed stocks traded in New York to an all-time high, but Gadjah Mada University economist Anthonius Tony Prasentiantono said this will not last long.
“If they went up to high; it will create a bubble and this outflow will be slow if our tax amnesty program is successful,” he said.
The tax amnesty program has so far resulted in Rp4,009.3 trillion declared assets and Rp43.75 trillion repatriated funds. “They are bringing higher inflows that make our forex reserves stable,” Tony said.
Source: http://en.tempo.co/read/news/2016/12/16/056828295/Sri-Mulyani-Says-Fed-Rate-Hike-will-Not-Affect-Indonesia