The nationwide political situation has been steady, and some crucial amendments to the 1945 constitution were successfully passed during the annual session of the People's Consultative Assembly (MPR), which are designed to make the country more democratic. In addition, the growth of gross domestic product accelerated in the second quarter to 3.51 per cent following a simmering 2.47 per cent growth in the previous quarter of this year. Thus, in the first six months of this year, Indonesia's economy grew 2.87 per cent. The Central Statistics Bureau projected it could grow by 3.8 per cent in the whole year.

In her annual report to the assembly earlier this month, an optimistic Megawati said: "Should we be able to maintain the momentum, the target of 4 per cent economic growth this year will be more likely to achieve."

In line with this projection, the Indonesian Government has lifted the target for the coming year's GDP to a new high of 5 per cent.

The Indonesian president asserted that the economic crisis that had lingered in the country for years was over.

Analysts in Indonesia said that key economic factors had been more and more positive - the country's currency has been strengthened since the beginning of this year, foreign-exchange rates have stabilized, inflation has been limited to single-digit growth, and the benchmark interest rate has been lowered. Though Indonesia's exports continue to decline, the country has still achieved a foreign-trade surplus. This helped keep its foreign-exchange stocks at a relatively high level - some US$22 billion at present. The government is targeting a figure of US$28.9 billion by the end of this year. All manufacturing sectors, except mineral resources and exploitation, have reported improvements.

However, it is also noticeable that the present economic revival has been propped up by a large amount of government spending and private consumption. So it is generally regarded as very fragile. In the first half of the year, Indonesian family consumption rose 6.3 per cent compared to the corresponding period last year, while government spending increased by 7.09 per cent. However, both foreign and domestic investment as well as exports still remain sluggish and weak.

In a bid to maintain the current momentum, the Indonesian Government has implemented the familiar formula offered by the International Monetary Fund. The newly published draft state budget for 2003 indicates that fiscal policy will focus on reducing the budget deficit, cutting government subsidies on fuel and electricity. At the same time, the government plans to bring in more tax revenue, which means that many Indonesians will have to tighten their belts further.

The draft plan indicates that the government is likely to cut subsidies by some 39 per cent, worth some US$2.91 billion. Meanwhile, the increased tax revenue could help raise the state revenue to some US$28.98 billion for the whole year.

But the Megawati government's announcements also included more encouraging news for the people. The budget allocation for education, culture and sports will represent 20 per cent of the total budget, the largest percentage so far. Moreover, civil servants, teachers and military personnel will have their salaries increased by 10 per cent.

(Xinhua News Agency August 22, 2002)