Troubles ahead as IMF suspends aid<\/p>\n
JAKARTA (JP): A delay in the disbursement of International
\nMonetary Fund aid to Indonesia would have a serious impact on the
\neconomy because confidence would drop, according to a noted
\neconomist.<\/p>\n
\"The impact on the economy will be tremendous because
\nconfidence will tumble,\" Pande Raja Silalahi, an economist at the
\nprestigious private think-tank Center for Strategic and
\nInternational Studies (CSIS), told The Jakarta Post at the
\nweekend.<\/p>\n
Pande was commenting on reports that the IMF had decided to
\npostpone its review of the country's economic programs which
\nautomatically delay the next tranche aid disbursement.<\/p>\n
The Fund delayed the review due to a government failure in
\nresolving the East Timor violence and the Bank Bali scandal.<\/p>\n
The IMF was supposed to review the economic programs in the
\nmiddle of this month, to be followed by a US$460 million aid
\ndisbursement in October.<\/p>\n
Bank Indonesia Governor said last week at a hearing session
\nwith the House of Representatives commission VIII on banking and
\nfinance, that a one to two month aid suspension would not have a
\nserious impact on the central bank's foreign exchange reserves.<\/p>\n
\"A one or two month suspension will not have a (serious)
\nimpact,\" he told parliament.<\/p>\n
He said that the current amount of gross forex reserves, at
\naround $27 billion in August, was \"sufficient.\"<\/p>\n
But Pande said that it's not the amount of the IMF money that
\ncounts, it's the impact on domestic and international confidence.<\/p>\n
\"Don't count the money, but the confidence that comes along
\nwith it (the IMF money),\" he said.<\/p>\n
Pande pointed out as an example that many business
\ntransactions would also be delayed following the suspension of
\nthe IMF aid.<\/p>\n
\"Importers will have difficulties in ensuring their overseas
\ntrading partners,\" he said.<\/p>\n
The IMF is organizing a $46 billion bailout to help finance
\nIndonesia's economic reform programs, in which the Fund
\ncontributed some $12.3 billion. More than $10 billion has been
\ndisbursed.<\/p>\n
The rupiah and the stock market was badly hit last week due to
\nthe East Timor riots and the Bank Bali scandal on fears that the
\nmultilateral donors would suspend their aid to the country.<\/p>\n
The World Bank has also threatened to withhold its aid for the
\ncountry amid the \"humanitarian disaster\" in East Timor and
\nstalled progress in resolving the Bank Bali scandal.<\/p>\n
The Bank said last week that the $5.9 billion in aid pledged
\nin July by donors grouped under at the Consultative Group on
\nIndonesia was linked to a peaceful political resolution in East
\nTimor.<\/p>\n
Hundreds of people have been killed and thousands have left
\nEast Timor due to violence by prointegration militiamen allegedly
\nbacked up by the Indonesian military. The violence escalated
\nafter 78.5 percent of the East Timorese people chose independence
\nin a referendum organized by the United Nations.<\/p>\n
But Coordinating Minister for Economy, Finance and Industry
\nGinandjar Kartasasmita warned last week in New Zealand that it
\nwasn't appropriate to use international financial institutions to
\npursue political goals, such as an easing of violence in East
\nTimor.<\/p>\n
The slow resolution to the Bank Bali scandal which revolves
\naround the illegal transfer of US$80 million from the bank to a
\nprivate firm linked to Habibie's inner circle has also irked the
\nIMF and the World Bank.<\/p>\n
IMF first deputy managing director Stanley Fischer expressed
\ndisappointment last week over signs of the government stalling on
\nits promise to get to the bottom of the scandal. (rei)<\/p>",
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