'RI first to escape from crisis'<\/p>\n
JAKARTA (JP): Indonesia is set to escape the regional currency
\ncrisis first due to the massive bailout package sponsored by the
\nInternational Monetary Fund (IMF), according to a Morgan Stanley
\nsenior economist.<\/p>\n
Timothy J. Condon, vice president of Hong Kong-based Morgan
\nStanley Asia Ltd., said the IMF program would support the
\ncurrency and prevent further uncontrolled depreciation of the
\nrupiah.<\/p>\n
\"What is needed in Indonesia is confidence that the rupiah
\nwill not go into a free fall as the short-term debt overhang is
\nunwound. The IMF is precisely what will deliver this confidence,\"
\nCondon said at a seminar here yesterday hosted by the Econit
\nAdvisory Group.<\/p>\n
He contended that the sharp depreciation of the rupiah in the
\npast three months was driven by dollar buying pressure from local
\ncorporations to repay or roll over their short-term debt, which,
\naccording to the Bank for International Settlement, stood at
\nUS$34.2 billion as of the end of 1996.<\/p>\n
Out of the total short-term private debt, some $20 billion was
\nestimated to be due within the next six months, Condon said.<\/p>\n
Nevertheless, the total value of the IMF package, along with
\nbilateral aid commitments, exceeded the amount of short-term
\ndebt, he said.<\/p>\n
The IMF-sponsored bailout package for Indonesia totals $23
\nbillion, including standby loans from the World Bank and Asian
\nDevelopment Bank.<\/p>\n
Several countries have also pledged billions of dollars in
\nstandby loans, which could increase the aid package to more than
\n$30 billion.<\/p>\n
The bailout package should work well because it was supported
\nby a \"good program\", which covered monetary and fiscal policy
\nmeasures, and financial and structural economic reform, Condon
\nsaid.<\/p>\n
\"These measures mark the most concerted effort to clean up the
\nfinancial system to date in Indonesia and the most concerted push
\nto deregulate the real sector of the economy since 1986,\" Condon
\nsaid.<\/p>\n
The package also marked a strong move away from the export-
\noriented protectionism-incentive regime toward a more transparent
\nand uniform system of incentives, he said.<\/p>\n
\"That will serve Indonesia better as it confronts the
\nchallenge of moving up the value-added ladder and competing with
\nChina and India in light manufacturing,\" he said.<\/p>\n
\"The huge devaluation of the rupiah will quickly be felt by
\nimporters, who will cut back. Exporters, in contrast, will
\nexperience a significant margin improvement,\" he said.<\/p>\n
He predicted that Indonesia's 1997 trade surplus would reach
\n$9.7 billion, up from $6 billion last year.<\/p>\n
The current account deficit would narrow to $4.7 billion from
\n$7.8 billion last year, predicted Condon.<\/p>\n
\"It is the solid evidence of a turnaround in the trade account
\nthat is going to dominate market perceptions about Indonesia and
\nenhance confidence in the stability of the rupiah,\" he said.<\/p>\n
Condon forecast that the rupiah would begin to recoup from
\nsome of its excessive depreciation and would settle at 3,100
\nagainst the dollar by the end of the year.<\/p>\n
Yesterday, the rupiah was traded at 3,250 to the dollar in the
\nspot market, up from about 3,600 last week when the IMF package
\nwas not yet announced.<\/p>\n
Enhanced confidence in the rupiah and external accounts would
\nallow domestic interest rates to ease, Condon said.<\/p>\n
\"I expect rupiah interest rates to continue to fall and reach
\ntheir early August 1997 levels by the end of the first quarter of
\n1998,\" Condon said.<\/p>\n
Falling interest rates and an increasing trade surplus would
\nmake it unlikely that banks would suffer a deterioration in
\ncredit quality sufficient enough to cause a banking crisis, he
\nsaid.<\/p>\n
\"There will be problems in the banking system, but I expect
\nthey will remain localized, rather than be systemic, and will be
\nwithin the ability of the authorities to manage,\" he said. (rid)<\/p>\n
World Bank -- Page 10<\/p>\n
Currencies -- Page 11<\/p>\n
Econit -- Page 12<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/ri-first-to-escape-from-crisis-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }