IMF should account for poor advice during crisis: Govt<\/p>\n
Bloomberg, Jakarta<\/p>\n
Indonesia said the International Monetary Fund must account for
\nits poor advice during the 1997 financial crisis after the fund
\nsaid it failed to fully diagnose the magnitude of a liquidity
\nproblem in the economy.<\/p>\n
"It is not sufficient to acknowledge it made a mistake without
\nany corrective actions in terms of the people and system that
\ncreated the mistake," Mahendra Siregar, senior aide to Dorodjatun
\nKuntjoro-jakti, top economic minister, said in an interview.<\/p>\n
"They need to provide accountability. This is not a
\ndissertation. This is the real world."<\/p>\n
Indonesia's trade collapsed in 1998 after then-President
\nSuharto's government, under fund pressure, closed some banks,
\nchoking credit to exporters and leading to a run on the currency
\nthat saw the rupiah fall from 2,400 to the dollar to 16,525.<\/p>\n
Since then, the government has seized 72 banks, shut 52 and
\nrecapitalized 20.<\/p>\n
The IMF's Independent Evaluation Office on Tuesday said the
\nWashington-based fund failed to see the government-induced
\ncurrency shortage and the economic impact of investors pulling
\nfunds out of the country.<\/p>\n
The simultaneous closure of 16 banks under pressure from the
\nfund also shifted money from private banks to state and foreign
\nbanks, skewing measurements of whatever liquidity remained, it
\nsaid in a report.<\/p>\n
"It is hard, now, to comprehend just how mild the problem
\nwas judged to be," the report said.<\/p>\n
The IMF put together a US$36 billion package for Indonesia
\nbetween 1997 and 2003 to tide over the crisis after the
\ngovernment spent about Rp 650 trillion to bail out lenders by
\ninjecting funds to boost their capital after debtors defaulted on
\nloans and the currency collapsed.<\/p>\n
Southeast Asia's No. 1 economy has yet to recover from the
\ncontraction of 1998. Economic growth lags many of its neighbors
\nand is dependent on private consumption, which accounts for 70
\npercent of the economy.<\/p>\n
"The benefit of hindsight offers a luxury that one did not
\nhave in the middle of the complex and fast-changing situation
\nthat characterized late 1997 and early 1998," David Nellor, the
\nfund's representative in Jakarta, said in an e-mail to Bloomberg
\nNews.<\/p>\n
"The report does not suggest that the crisis could have been
\navoided by another course of action."<\/p>\n
Hubert Neiss, the top fund official for Asia during the
\ncrisis, wasn't available for comment.<\/p>\n
The country exited the IMF loan program in December 2003.<\/p>\n
Over the last few years, the IMF has pushed Indonesia to sell
\nstate-seized banks, control spending, reign in inflation and
\nstabilize the currency. Inflation, one key pillar of the IMF's
\nprescription, has slowed from a peak of 82 percent in 1998 to 6.5
\npercent in May.<\/p>\n
"Our priority is to move on," Siregar said. "All the
\nindicators show the economy has moved away from the situation at
\nthe time of the crisis. Banks have recovered, monetary and
\neconomic stability has been achieved, the budget deficit has
\nfallen."<\/p>\n
The IMF said in the report its errors also delayed a banking
\nindustry overhaul and contributed to a 13.1 percent economic
\ncontraction in 1998, compared with an IMF forecast of 5 percent
\ngrowth.<\/p>",
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