Indonesia backs IMF plan, but risks persist<\/p>\n
WASHINGTON (Reuters): Indonesia's finance minister said here
\nover the weekend Indonesia would stick to the terms of a loan
\nagreement with the International Monetary Fund, learning to live
\nwithout subsidies despite the pain they bring.<\/p>\n
But Fuad Bawazier admitted political turmoil in his country of
\n200 million people could slow the reform package.<\/p>\n
He said there were signs of economic stability, but it would
\ntake time to return to the rapid growth rates the once-time tiger
\neconomy had enjoyed before.<\/p>\n
\"We are going to stick to the plan right now,\" Bawazier told
\nReuters and Reuters Television in a joint interview.<\/p>\n
Asked later about the protests -- triggered by complaints
\nabout IMF-mandates price rises for food, fuel and transport, and
\nby increasingly vocal calls for political reforms -- he said the
\ngovernment had no choice but to lower subsidies.<\/p>\n
\"We have to remove the subsidy to tighten the fiscal policy.
\nPeople have to realize we cannot continue keeping subsidies,\" he
\nsaid, noting that a generation had grown up with low prices and
\nwould have to get used to the change.<\/p>\n
Several people have been reported killed in the Indonesian
\nrioting and the protests have unsettled financial markets and
\ndriven the rupiah currency sharply lower.<\/p>\n
But Bawazier, appointed in a big government reshuffle in
\nMarch, said he hoped the government would be able to help the
\nrupiah through dialogue with protesters rather than by raising
\ninterest rates. He said there were no plans for a crack-down.<\/p>\n
\"I do not think we can continue raising interest rates. Maybe
\nsome other measures need to be taken as well,\" he said.<\/p>\n
Asked if protest riots could slow the program, he replied:
\n\"There is a possibility of that. The focus is going to be split,
\nat least for the time being.\"<\/p>\n
The rupiah is currently trading at around 9,000 to the dollar,
\nwell below a government target of an average 6,000 rupiah per
\ndollar rate for the year to March 1999.<\/p>\n
The international community has just resumed payments to
\nIndonesia after a six-week gap while the government and the IMF
\nwrangled about the shape of the economic reform program.<\/p>\n
The IMF approved a US$1 billion payment on Monday and the U.S.
\nExport-Import Bank stepped in with $1 billion of export credit
\nguarantees on Friday.<\/p>\n
Bank Chairman James Harmon said the money would fill a gap
\nleft when the private sector stopped offering letters of credit,
\neffectively bringing trade with Indonesia to a halt.<\/p>\n
\"We have stepped in ... to fill that gap and of course we are
\nsupporting U.S. exports by doing that. We are also providing the
\nliquidity for Indonesia's economy to operate,\" he told reporters
\nafter signing the loan.<\/p>\n
Harmon said he hoped the export guarantees could help calm the
\npolitical situation. \"We are hoping that by providing the funds
\nso that Indonesia can buy goods this will bring some greater
\nstability,\" he said.<\/p>\n
Bawazier said Jakarta had also asked the United States to hand
\nover some of the $3 billion it has promised to contribute to the
\nso-called second line of defense of a $40 billion international
\nrescue deal.<\/p>\n
Australia, Japan and Malaysia have all said they would make
\nbilateral funds available, but the United States has not yet
\ngiven any indication that it plans to pay.<\/p>\n
Indonesia's other major problem centers on some $80 billion of
\nprivate sector debt and creditors opened rescheduling talks in
\nTokyo on Friday. Bawazier said he expected details of a deal to
\nbe made final during the talks.<\/p>\n
\"I think they are going to finalize the details. They are
\ngoing to find a framework to reschedule the payments and that is
\ngoing to reduce pressures on demand for foreign exchange,\" he
\nsaid.<\/p>",
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