Indonesia Cuts Balance of Payments Deficit

Jakarta (Antara Bali) - Bank Indonesia said the country succeeded in cutting its balance of payment deficit  to US$2.5 billion in the second quarter of this year from US%6.6 billion in the previous quarter.

Bank Indonesia Governor Agus Martowardojo attributed the decline to effective fiscal policies adopted  by the central bank and the government.

"The policy succeeded in reducing the impact of the global financial woes  on the country's balance of payments," Agus said in a news release issued here on Monday.

Agus said surplus which was recorded again in capital and financial account after a big deficit in the previous quarter, resulted in significant decline in the balance of payment deficit.  
   
On the other hand , normally  the current account deficit rose in the second quarter compared with the previous quarter.

In line with the deficit in the balance of payments, the country's foreign exchange reserves fell to US$98.1 billion by the end of June after reaching more than US$110 billion several months earlier.

The shrinking foreign exchange reserves, however, are still enough to finance imports and service the government's foreign debts for 5.1 months or still well above the international adequacy standard.

Seasonal factor and falling prices of export commodities contributed to widening the current account deficit  from US$5.8 billion  or 2.6 percent of the country's GDP in the first quarter to US$9.8 billion in the second quarter  or 4.4 percent of the GDP.

The surge in the current account deficit was attributable to shrinking surplus in trade of commodities outside oil and gas  and widening deficit in services  and income accounts.

The surplus in trade of non oil/gas commodities shrank on a surge in imports especially imports of industrial basic materials and consumer  goods .

Increase in domestic consumption has  been normal in the second quarter compared with the first quarter every year.

Earning from the exports of commodities outside oil and gas has declined on falling price of major export commodities as a result of the Chinese and Indian slowdown.

Deficit in service account  widened on increase in payment for the transport of growing import goods, and growing number of  Indonesians traveling abroad in school holidays. (*/DWA)