A more flexible IMF

A more flexible IMF

The International Monetary Fund appears to have finally
recognized the folly of its earlier attempts to impose a
one-size-fits-all program on the very different problems faced by
Asian economies. The immediate effect is to clear one obstacle
from Indonesia's road towards recovery.

The fund's third revised agreement with Jakarta marks a
radical departure from its usual approach of pressing nothing but
austerity upon client governments. Evidently shaken by the riots
that followed the last attempt to end food and fuel subsidies,
the IMF is now allowing these to continue at three times the
previously agreed level, along with considerable social spending.

Had the fund moved in this way earlier, the death toll during
last month's violence might have been avoided: that will have to
be left for historians to judge. The important thing now is to
recognize the numerous other problems which Indonesia must still
resolve.

The new agreement's credibility with the markets is low, as
shown by the renewed drop in the value of the rupiah yesterday.
It may only be a matter of time before a fourth revision becomes
inevitable.

Until the ethnic Chinese community can be persuaded that it is
safe to return and play their economic role -- and until some
semblance of normal life resumes -- any economic forecasts must
be treated as guesswork. Other challenges still lie ahead,
including reforming the banking sector and an agreement on
restructuring foreign debt.

The biggest task is political change. President Bacharuddin
Habibie is expected to address this on Monday by announcing the
date of a special session of Indonesia's parliament to consider
constitutional reform.

The President has made clear that he wants to delay change.
But, until he recognizes that there can be no long-term stability
without political reform, Indonesia's battered economy stands
little hope of staging any significant recovery.

-- The South China Morning Post