Commentary: Indonesia Stirs Ghosts of 1998 With Deficit Debate

Indonesia has more reason than most to be wary of backsliding on its commitment to budget discipline, Bloomberg News reported. Its deficit ceiling is an important piece of the economic and political architecture that emerged from the Asian financial crisis of the late 1990s. Indonesia experienced more than just a run on the currency, a deep recession and a rescue by the International Monetary Fund. The crunch morphed into riots, communal violence and the overthrow of dictator Suharto, who had ruled with military backing for more than three decades. So the news that President Joko Widodo’s government is considering easing its self-imposed limit is a political jolt. The cabinet is discussing whether and how to relax legal requirements that the budget deficit be restricted to 3 percent of gross domestic product, Finance Minister Sri Mulyani Indrawati told Karlis Salna of Bloomberg News on Wednesday. For now, the government will adhere to the cap, Indrawati said. Read more.
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