IMF defends BI management: Winters<\/p>\n
JAKARTA (JP): Prominent U.S. economist Jeffrey Winters
\nlambasted on Thursday the International Monetary Fund (IMF) for
\ntrying to block the government's plan to amend the central bank
\nlaw and dismiss the existing board of governors.<\/p>\n
Winters, a professor of political economics at Northwestern
\nUniversity in Chicago and an analyst on Indonesia, said that the
\namendment measure and the demand for the resignation of Bank
\nIndonesia top management was \"a reasonable and responsible\"
\nresponse by the government following revelations that billions of
\ndollars had gone \"missing\" from Bank Indonesia.<\/p>\n
He added that the irregularities \"happened right under the
\nIMF's nose\" which had been closely monitoring Bank Indonesia.<\/p>\n
\"And yet the IMF has stubbornly defended Bank Indonesia's
\nmanagement against summary removal, even going so far as to
\nsuspend a US$400 million loan tranche partly because of this
\nissue,\" he said at a seminar on politics and the economy in
\nJakarta.<\/p>\n
Winters said that it would be unimaginable for U.S. Federal
\nReserve Bank chairman Allan Greenspan to remain in office if the
\nCongress discovered that billions of dollars had gone missing
\nfrom the Bank.<\/p>\n
He also criticized the IMF for allowing Bank Indonesia to be
\ngiven independence in 1999 without a prior audit of the central
\nbank, which had been plagued by massive corruption during the era
\nof former authoritarian president Soeharto.<\/p>\n
But former IMF Asia Pacific deputy director Hubert Neiss, who
\norganized the Fund's rescue program in Indonesia from late 1997
\nuntil last year, defended the IMF's measures.<\/p>\n
Neiss said that it was very important at the time to provide
\nBank Indonesia with independence to help arrest the hyper-
\ninflation which reached around 70 percent in 1998.<\/p>\n
He said that implementing an audit process first would have
\ntaken a very long time.<\/p>\n
Ideally ... it should have been done the other way around. But
\nin the midst of a crisis you cannot have an orderly sequence,\"
\nsaid Neiss, who is now a senior official at Deutsche Bank.<\/p>\n
The IMF has become the second master of Bank Indonesia since
\nthe fund signed a multi-billion dollar loan package with the
\ncountry in late 1997.<\/p>\n
The IMF helped push through approval of a new central bank law
\nby the parliament in May 1999, during the administration of
\nSoeharto's handpicked successor B.J. Habibie, giving Bank
\nIndonesia the independent status.<\/p>\n
But the administration of Abdurrahman Wahid proposed to the
\nlegislature in November last year, a bill amending the central
\nbank law following revelations by the Supreme Audit Agency (BPK)
\nthat around Rp 138 trillion (US$13 billion) of the Rp 144.5
\ntrillion in emergency loans channeled by Bank Indonesia to ailing
\ndomestic banks between 1998 and 1999 had been abused,
\ntheoretically leaving the central bank bankrupt.<\/p>\n
The government has said that its amendment is needed to
\nimprove the accountability of Bank Indonesia. Under the plan,
\nBank Indonesia governor Sjahril Sabirin and his deputies must
\nimmediately resign following approval by the legislature.<\/p>\n
But the amendment plan has irked the IMF, which said that it
\ncould jeopardize the independence of Bank Indonesia. The fund
\ndelayed the disbursement of a $400 million loan tranche to the
\ncountry, scheduled for release in December last year, partly due
\nto these concerns.<\/p>\n
The government then agreed to an IMF demand to form a panel of
\ninternational and domestic experts to review the proposed
\namendment. Results of the panel's analysis have yet to be made
\npublic.<\/p>\n
The IMF special mission is currently in Jakarta trying to
\nreach a new agreement with the government on reform measures, a
\npre-requisite for disbursement of the $400 million loan
\ninstallment, which is part of a $5 billion loan promised by the
\nfund to the current administration early last year.<\/p>\n
\"The IMF stance is adding more damage to an already damaged
\nrupiah and economy. This is unnecessary and cruel,\" Winters said.<\/p>\n
The rupiah dropped to Rp 11,095 per U.S. dollar late on
\nThursday, from Rp 10,960 on Wednesday, amid domestic political
\njitters.<\/p>\n
But Abdurrahman argued that the current weakening of the
\nrupiah provided further evidence that the Bank Indonesia governor
\nmust be replaced.<\/p>\n
\"The current weakening of the rupiah reflects the fact that
\nthe financial market does not accept Sjahril,\" legislator Habil
\nMarati quoted Abdurrahman as saying after a meeting with the
\nPresident. (rei)<\/p>",
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