Those who are still working have seen their purchasing power slashed by the rupiah's freefall, and fear traditional post-Ramadan bonuses may not be paid by troubled companies. That is an understatement. The last thing they need is unrest triggered by unemployment or higher prices on crucial commodities. On Dec. 30, Jakarta even banned all exports of crude palm oil for the first quarter of this year, sacrificing foreign exchange earnings by local companies in order to keep cooking oil prices stable. Political reality demanded higher spending.
Economic realities appear to have had less influence on the budget planners.
That is what worries economists. Even worse, the country may find meeting its dollar obligations onerous. The most fundamental reform is restructuring the banks, many of which are overextended and undercapitalized. The week before the budget speech, the government announced that four state banks would be merged. Until that happens, no one is going to be holding rupiah.