IMF's ominous message<\/p>\n
Very few people would have missed the negative signal sent by
\nthe failure of the International Monetary Fund (IMF) and the
\nIndonesian government to agree on a new reform accord last week,
\nhowever hard both parties tried to sugarcoat the unpleasant
\nreality with such comments as \"we have completed the basic draft
\nof the letter of intent\" and \"we have reached a basic agreement
\nat the mission level\".<\/p>\n
The blunt reality is that this is the second thumbs-down the
\nIMF has given the government of Abdurrahman Wahid, after a
\nsimilar mission in mid-April also failed to revive the reform
\nagreement, which was held up last December.<\/p>\n
The IMF high-level mission is simply not confident that the
\npresent Cabinet is capable of executing the sorely needed reform
\nmeasures, given Abdurrahman's shaky political leadership. Hence,
\nwhat is the point of drawing up a contract that most probably
\nwill not be honored.<\/p>\n
Other than the impending impeachment of President Abdurrahman
\nby the nation's top legislative body, the People's Consultative
\nAssembly, in a special session early next month, there was really
\nno other good reason for the IMF not to revive the reform program
\nunder a new letter of intent.<\/p>\n
All the requirements that have held up the disbursement of the
\nthird US$400 million tranche of the IMF's $5 billion since
\nJanuary have been met. The government even backed down on what it
\nhad said was the nonnegotiable issue of the planned central bank
\nlaw amendment, which would have led to the replacement of Bank
\nIndonesia's entire board of governors.<\/p>\n
However, in order to avoid the impression of the IMF meddling
\nin politics, mission leader Anoop Singh, the IMF director of Asia
\nand the Pacific, insisted that the failure to reach an agreement
\nhad nothing to do with the Assembly's special session.<\/p>\n
But the IMF's first deputy managing director, Stanley Fischer,
\nhinted in Tokyo in the middle of last week that it was difficult
\nto predict when a final agreement could be reached, given the
\npolitical uncertainty in Indonesia and the lack of progress in
\ndebt restructuring and the sale of nationalized banks.<\/p>\n
Thomas Dawson, the director of external affairs at the IMF
\nheadquarters in Washington, acknowledged over the weekend that
\nseveral details still needed to be worked out to reach a final
\nagreement. This indicated that things were not as smooth as
\nofficials in Jakarta claimed.<\/p>\n
But in another apparent attempt to avoid the impression of the
\nIMF trying to buy time, waiting for a new government to emerge
\nlater next month, Dawson noted that \"at the mission level, they
\nhave reached a basic agreement ... with other details needing to
\nbe worked out in Washington\".<\/p>\n
Since Indonesia joined the IMF bailout program in November
\n1997, we have never heard an IMF review team use the term
\n\"mission-level agreement\".<\/p>\n
The review teams have always been headed by the Asia-Pacific
\ndirector, who is authorized to give a fiat on the spot (in
\nJakarta) to a final letter of intent, which normally is approved
\nby the IMF executive board two weeks later. This process seems
\nnormal, otherwise it would be a gross waste of resources to send
\nthe mission to Jakarta. What would be the point of sending such a
\nhigh-level executive as Asia-Pacific director Singh to Jakarta if
\nthe details of the agreement had yet to be worked out by the
\nboard in Washington?<\/p>\n
Although the IMF would certainly deny it, one cannot help but
\nget the impression that the fund seems uncomfortable with the
\ncurrent finance minister, Rizal Ramli, a staunch critic who often
\nrecounts in emotional outbursts what he sees as past mistakes by
\nthe IMF in the early handling of Indonesia's economic crisis in
\nlate 1997 and early 1998.<\/p>\n
But the problem is that most of the reform measures to be
\noutlined in the letter of intent -- fiscal consolidation, bank
\nrestructuring, corporate reform and asset sales -- fall under the
\njurisdiction of the finance minister. So all in all, despite the
\nsugarcoated remarks used to describe the outcome of the latest
\nIMF review mission, a lot of things could still happen before a
\nfinal agreement is reached.<\/p>\n
But one thing is crystal clear: the IMF is no longer confident
\nthat the present government is capable of executing the reform
\nprogram, especially now when the political and macroeconomic
\nconditions are much worse than they were last year.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/imfs-ominous-message-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}