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WASHINGTON, July 28 The International Monetary
Fund on Tuesday urged Indonesia to maintain some stimulus in
2010 and said it saw room for a somewhat higher fiscal deficit
than currently planned.
In its annual assessment of Indonesia's economy, the IMF
said monetary policy easing since December had been "timely and
However, the IMF said authorities should proceed more
cautiously given the danger that global investors could once
again shun risk if the global economic recovery falters.
The IMF board appeared divided over whether Indonesia needs
to keep adding to its foreign exchange reserve.
Some directors said Indonesia should accumulate larger
reserves to preserve investor confidence in case global risk
aversion deteriorates. Others said current reserve levels were
Meanwhile, an IMF staff assessment concluded that
Indonesia's exchange rate was "broadly in line with
fundamentals" and reserves are at a comfortable level.
Overall, the IMF said Indonesia's economy had started to
rebound this year, supported by strong consumption tied to
fiscal stimulus measures.
But it warned that growth prospects could be set back if
global investors started to turn away from risky assets in
The IMF said it was important that Indonesia "strives to
achieve the appropriate policy mix, and promptly adjust it as
needed, to preserve macroeconomic and financial stability."
It said further strengthening the country's tax system and
lowering energy subsidies would help create fiscal space for
key infrastructure and social spending.
(Reporting by Lesley Wroughton; Editing by Neil Stempleman)