The IMF bashing<\/p>\n
As the new reform agreement with the International Monetary
\nFund (IMF) now enters its seventh month of delay, without any
\nclear signs as to when negotiations will resume, Indonesia's
\nchief economic minister Rizal Ramli appears to be increasingly
\nfrustrated with the multilateral agency.<\/p>\n
The situation appears very different now from last August,
\nwhen a highly confident Rizal took over the leadership of the
\nCabinet's economic team and acted firmly to rewrite the
\ngovernment's accord with the IMF. Recently, however, he has
\nresorted to a sort of IMF-bashing campaign, scoffing at its role
\nin Indonesia's bailout and its contribution to the country's
\neconomic recovery.<\/p>\n
He has lambasted what he sees as the IMF's excessive meddling
\nwith policy details and interference in areas completely outside
\nits authority and competence. He also cited several major
\nmistakes committed by the IMF in its program between 1997 and
\n1999.<\/p>\n
Rizal's frustration is, to a certain extent, quite
\nunderstandable. His economic team has been working very hard,
\nthough sometimes in uncoordinated, haphazard ways, to implement
\nthe reform measures stipulated in the September 2000 agreement
\nwith the IMF.<\/p>\n
The problem is, though, that his team's hard toil has often
\nbeen sabotaged by the erratic leadership of President Abdurrahman
\nWahid and the President's tussle with the House of
\nRepresentatives.<\/p>\n
Apart from a highly respectable economic growth of 4.8 percent
\nlast year, substantially up from almost zero growth in 1999 and a
\ncontraction of nearly 14 percent in 1998, Rizal now has nothing
\nmuch else to flaunt this year.<\/p>\n
The rupiah's exchange rate, which rose to as high as Rp 7,000
\nagainst the U.S. dollar in September 1999, has now plunged to as
\nlow as Rp 11,500, thereby upsetting estimates on major items of
\ngovernment revenue and expenditure and threatening the state
\nbudget with an unmanageable deficit. Estimated economic growth
\nfor this year has been slashed to a mere 3.5 percent.<\/p>\n
Even though corporate debt restructuring and asset sales by
\nthe Indonesian Bank Restructuring Agency have been running more
\nquickly, they remain below the pace required to strengthen the
\nbudding recovery. The privatization of state companies is even
\nmore dispirited.<\/p>\n
As the fate of the IMF's third US$400 million tranche of its
\n$5 billion bailout fund, supposed to be made last December,
\nremains uncertain, Rizal and his team cannot but conclude that
\nthe agency has adopted delaying tactics.<\/p>\n
When the IMF decided on the delay last December, it cited slow
\nprogress in corporate debt restructuring, postponement in the
\nsales of Bank Central Asia and Bank Niaga and concerns about new
\nborrowings by the local administration as the main reasons.<\/p>\n
But when these issues were subsequently resolved, the IMF came
\nup with another requirement: the satisfactory completion of the
\nproposed amendments of the central bank law. When the House
\nstarted deliberating the law amendments, the agency imposed
\nanother tie -- demanding the government cancel its plan to issue
\nasset-backed dollar bonds.<\/p>\n
When the IMF sent a review team in mid-April, there was great
\nhope that a new reform accord was in the pipeline. But the team
\nnot only left without any commitment but also slapped on another
\ncondition: the 2001 state budget must be amended to make it more
\nrealistic.<\/p>\n
The IMF cannot entirely be blamed for its misgivings in
\ndealing with Abdurrahman Wahid's government, given its notorious
\nrecord of backtracking on its commitment to reform measures. But
\nthen one may also criticize the agency for seemingly pressing too
\nhard on a government that is grappling with a multidimensional
\ncrisis.<\/p>\n
The core issue here is that as the government's credibility
\nand popularity have been sharply eroded, especially following the
\nheightened political uncertainty that has now worsened into a
\nleadership crisis, its ability to take painful reform measures is
\nweakening.<\/p>\n
The additional requirements imposed by the IMF cannot simply
\nbe seen as a delay tactic, waiting for a new government to emerge
\nafter the political crisis is hopefully resolved in August.<\/p>\n
New conditions such as the budget amendments are needed
\nanyway, with or without the IMF asking for it. The independence
\nof the central bank should be maintained. Rizal's plan to issue
\ndollar bonds secured with natural gas export revenues (already
\ncanceled) would further increase the country's foreign debts that
\nhave now exploded to a critical level of more than $140 billion.<\/p>\n
Picking on the IMF and bickering is the last thing the
\ngovernment needs, especially given the current leadership crisis.
\nThe blunt reality, however bitter it may be, is that the market,
\nforeign creditors and even the majority of informed people in the
\ncountry still have more trust and confidence in the IMF, despite
\nits mistakes and shortcomings, than the present government, which
\nin the public's perception is an outgoing one.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/the-imf-bashing-1447899208",
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