Indonesia can manage without IMF, says Citrin<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The Senior advisor to the International Monetary Fund's Asia
\nand Pacific Department, Daniel Citrin said on Thursday that if
\nthe market situation remained stable, Indonesia's financial or
\nfiscal condition would be manageable even without special
\nfinancial aid from the Fund and the Paris Club of sovereign
\ncreditors.<\/p>\n
Citrin said at a press conference that it was entirely up to
\nthe Indonesian government to decide on the kind of financial
\nrelationship it would have with the International Monetary Fund
\n(IMF) after December, when the current Extended Fund arrangement
\nends.<\/p>\n
"There are three options available for Indonesia upon the
\ncompletion of the current arrangement. But for sure, the current
\nfacility that began in February 2000, can no longer be extended,"
\nadded Citrin, who is here for the ninth quarterly review of the
\nreform programs.<\/p>\n
Citrin was accompanied by Stephen B. Schwartz, division chief
\nof the IMF Asia and Pacific Department and David Nellor, the
\nIMF's chief representative in Indonesia.<\/p>\n
The three options, according to Citrin, would be to request a
\nStandby Arrangement, a Precautionary Standby Arrangement or
\nnothing at all, but each alternative would have its own
\nconditions and consequences.<\/p>\n
Under a Standby Arrangement, which normally has a term of
\nbetween 12 and 18 months, Indonesia would still have access to
\nspecial loans from the IMF contingent upon approval of its reform
\nprograms by the IMF Executive Board. Such an arrangement would
\nalso still enable the government to request a rescheduling of its
\ndebt from the Paris Club.<\/p>\n
The conditions of the Precautionary Standby Arrangement are
\nsimilar to the Standby Arrangement, except that the government
\nwould be ineligible for any debt rescheduling from the Paris
\nClub.<\/p>\n
Thirdly, Citrin added, completely ending any special
\narrangement with the IMF would deprive the government of any
\nchance of debt rescheduling.<\/p>\n
"At this stage, if the economy continues to stabilize, market
\nconfidence continues to improve, the rupiah strengthens and the
\ninterest rate keeps declining as they have done over the past
\nyear, our general conclusion is that the financial or fiscal
\ncondition will remain manageable," he said.<\/p>\n
"(Quitting the IMF program) is a reasonable objective to shoot
\nor strive for. It is not impossible for Indonesia to survive
\nwithout special loans from the IMF and Paris Club," Citrin
\nstated.<\/p>\n
He nonetheless cautioned that the final scenario would still
\ndepend on how the situation developed over the next seven months
\nwhen the precise numbers would become much clearer.<\/p>\n
"But if you ask for my personal view and if I were Indonesia's
\nchief economics minister, it would make sense to keep my options
\nopen and decide later on, in view of the uncertainty about the
\nglobal economy," he added.<\/p>\n
There have been increasing pressures from politicians and
\neconomists for the government to stop negotiating any special
\narrangement with the IMF after the end of the current program.
\nThis was also one of the recommendations made last year by the
\nPeople's Consultative Assembly, the nation's top policy-making
\nbody.<\/p>\n
Staunch critics of the IMF, from both the government and
\nprivate sector, often cite several major mistakes made by the IMF
\nin Indonesia in the 1997-1999 period, as well as the rigidity of
\nits policies, as the main reasons for stopping all special
\narrangements with the IMF.<\/p>\n
The IMF detractors claim the country's gross foreign reserves
\nof about US$33 billion and the strengthening macroeconomic
\nstability would enable the country to manage its economy without
\nany special loans from the IMF or the Paris Club.<\/p>\n
However, Minister of Finance Boediono warned last week that
\nwithout another rescheduling of the debt from the Paris Club, the
\ngovernment's foreign debt service payments would almost double to
\nRp 74 trillion (US$8.4 billion) next year, in addition to its
\ndomestic debt service burden, which would increase by 22 percent
\nto Rp 83.5 trillion.<\/p>\n
Defenders of the IMF in Indonesia have argued that the market
\nwould be more comfortable if the government maintained a special
\narrangement with the IMF, at least for one year, in view of the
\npolitically turbulent period expected ahead of the 2004
\nelections, in addition to the lack of government credibility with
\nregard to reform implementation.<\/p>\n
Citrin corrected some misunderstandings among many Indonesian
\nanalysts, who believe the government would have to prepay the
\nbulk of its debts ($8.6 billion) to the IMF if it no longer had a
\nspecial arrangement with the IMF.<\/p>\n
"Whichever of the three options Indonesia may take, it will
\nnot have to make any debt prepayment, but simply install the
\ndebts according to the original payment schedules," Citrin noted.<\/p>\n
He said he simply did not know how the market would react to
\nany of the three options Indonesia might take, but maybe the
\nmarket would prefer the first option (the Standby Arrangement).<\/p>\n
But whichever option is taken, "We expect the government to
\ncontinue its structural reforms. After all, the reforms have
\nalways been the government's own programs, even under the current
\narrangement," Citrin added.<\/p>",
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