Exit strategy from IMF must not create uncertainty: BI<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Bank Indonesia warned on Monday the government's exit strategy
\nfrom the International Monetary Fund (IMF) must not create
\nuncertainty, as it would come at the expense of confidence in the
\neconomy -- which has been on the rise lately.<\/p>\n
Hartadi Sarwono, the central bank's newly inaugurated deputy
\ngovernor, therefore suggested that the government, in repaying
\nits debts to the IMF, stick with the initial repayment schedule
\nwhatever exit strategy was adopted after the current program
\nexpires later this year.<\/p>\n
"The maturity profile of the debts (to the IMF) has been set
\nclearly. Why don't we follow it? Don't ask for a revision, it
\nwould only create further uncertainty," Hartadi told reporters on
\nthe sidelines of the swearing-in ceremony.<\/p>\n
By not creating new uncertainties, the rising confidence in
\nthe economy, as seen in the country's current stable
\nmacroeconomic indicators, could then be maintained, he explained.<\/p>\n
Indonesia is currently on the verge of ending a five-year US$5
\nbillion IMF loan program, which was first established in 1999,
\nand a special team is now exploring the best possible options for
\nthe post-program relationship with the IMF.<\/p>\n
In return for the financial aid, the IMF set out conditions in
\na number of letters of intent (LoI), which contained the
\ncountry's key economic reform programs and several time-bound
\ntargets, which the government has to meet quarterly.<\/p>\n
After the IMF program ends, Indonesia will owe about $9
\nbillion in total debts to the Fund. The country needs to return
\nat least some $6 billion as its quota as an IMF member only
\nstands at less than $3 billion.<\/p>\n
However, it remains undecided whether the payments of the
\nexcess funds will be made altogether, or follow the initial
\nschedule, which runs until 2010.<\/p>\n
Currently, the country's international foreign reserves, which
\nwill be used to repay the debts, stand at around $34 billion.<\/p>\n
State Minister for National Development Planning Kwik Kian Gie
\nis among those who have suggested that Indonesia should
\nimmediately repay all its debts to the IMF so that the Fund could
\nno longer exert influence over the management of the country's
\neconomic affairs.<\/p>\n
Others, however, say that Indonesia must use its reserves
\nwisely to further boost confidence, and therefore there is no
\nneed to repay the IMF loans -- which carry low interest rates --
\nall at once.<\/p>\n
Separately, Minister of Finance Boediono said that a careful
\nand thorough analysis had to be done in selecting an exit
\nstrategy from the IMF as a wrong decision could have a serious
\nimpact on the country's economic and political circumstances.<\/p>\n
Boediono pointed out that there were three crucial things the
\ngovernment needed to do to continue the economic recovery program
\nin the post IMF era, which all had a lot to do with retaining
\nconfidence in the economy.<\/p>\n
They were: ensuring fiscal sustainability in the 2004 state
\nbudget, the success of 2004 general election process and
\nmaintaining national integrity by allocating sufficient funds to
\nthe regions through the budget.<\/p>\n
Due to its critical nature, Boediono described the transition
\nto a post-IMF world as a "critical juncture" in the country's
\nefforts to build continued confidence in the economy.<\/p>\n
"This confidence is very important. We need to show that the
\ngovernment is capable of taking care of its own finances and that
\nwe're also capable of consistently undertaking economic reform,"
\nhe said.<\/p>",
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