Jokowi meets with IMF boss: regime concerned about rising global interest rates

TEMPO.CO, Jakarta – President Joko Widodo or Jokowi again met with the Managing Director of the International Monetary Fund (IMF) Kristalina Georgiava. Coordinating Minister of Economy Airlangga Hartarto, who participated in the meeting, said the government hopes the IMF, along with other developing countries, will support the G20 presidency and continue to provide a positive narrative on Indonesia.

“Because we are very worried about rising inflation in various countries, interest rates will enter a new regime, namely an increase in global interest rates,” Airlangga said quoting points from the statement. Jokowi at the Presidential Palace in Bogor, West Java on Sunday, July 17, 2022.

If this condition occurs, the general chairman of the Golkar party said that it will affect investment that Indonesia needs. However, interest rate hikes have started to occur in various countries.

Central banks around the world are scrambling to adjust to extremely high inflation at risk of spiraling out of control, and are forcing stronger policy action by aggressively raising interest rates, increasing the risk of a global recession.

Investors in the United States are already debating whether the Fed should now proceed with a 100 basis point rate hike or the biggest since the 1980s.

Canada’s central bank has already raised its key rate from 1.5% to 2.5%, the biggest rate hike in 24 years, and said further hikes would be needed.

Meanwhile, the European Central Bank (ECB) is still in line with the Japanese central bank, which has failed to respond to inflation by raising interest rates. But for the ECB, interest rates are expected to rise by 25 basis points next week.

Although there are concerns, Jokowi continues to convey that the domestic conditions in Indonesia are relatively good. When several countries enter recession, the potential for this to happen in Indonesia is still relatively low.

Next, Airlangga said, Jokowi also passed on several other notes on the Indonesian economy. Among them, inflation is still around 4.2% and economic growth is 5.01%. Then the debt to GDP ratio is 42%, while several other countries reach 100%.

Then the deficit is still around 4% and Current account deficit or CAD is always 0.5%. Finally, Jokowi reported to the IMF that Indonesia’s trade balance over the past 26 months was still positive and foreign cash reserves reached $135 billion.

Robert Butler

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