The Impact of Economic Depression on Health Status in Indonesia

1 The Indonesian Economy A decade before Asian economic crisis that hardly hit Indonesia, the Indonesian economy has achieved a remarkable growth of 7% a year. 1997 was a nightmare of the Indonesian economy. In the Middle of 1997 Indonesia suffered from severe drought and extensive forest fire lasted for several months and devastated million of rainforests. Due to severe drought Indonesian agricultural sector failed and Indonesia had to import rice and others. In July 1997, the Rupiah (Indonesian currency) began to collapse with falling exchange rate 30-40% to the US Dollar. The collapse of Rupiah continued and reached the peak between March and July 1998 when Rupiah plunged 600%. The price shocks associated with the collapse of Rupiah and removal of the Government subsidies for rice and other staple foods had reduced real income of the Indonesian people. During its economic booming, just before the crisis, the Indonesian economies relied heavily on imported materials. For example, more than 95% of raw materials for pharmaceutical products were imported. Whilst purchasing power of Indonesian was declining due to prices shock, many industries were unable to import raw materials and sell their products. In turn, this rendered mass laid-off. It was estimated that more than 5.5 million people lost their jobs in 1998. The government and international community began to offer financial assistance to recover the economy and to protect low-income citizens from adverse effects of this crisis. It was estimated that the number of people living below poverty line had increased from 27 million to 85 million. Many could not afford to buy foods and send their children to school. Indonesia had achieved significant progress to improve health status of its population. Significant improvements in economic development and serious efforts to reduce infant mortality rate have resulted in successful health improvement as shown in Figure-1. The Asian Development Bank, the World Bank, under the coordination of the International Monetary Fund (IMF) poured grants and loans for economic development and Social Safety Net (SSN) for lowincome earners. The social safety net program continues to be provided until 2001. The ADB provided with US$300 million loan, and will be added by another US$ 300, for health sector in eight provinces. The World Bank also provided Indonesia with loan for social safety net for the rest 19 provinces. The priority of this intervention was to protect the health status of the poor. To do that, the Government disbursed block grants money to more than 7,000 health centers in the country. The health centers may use the money to buy additional medicines and necessary medical supplies to provide health services for the poor. User charges for the poor were exempted. In addition, the Government also provided with medical services for high-risk pregnant women through midwives in each village.