Australia calls for IMF sensitivity in Indonesia

Australia calls for IMF sensitivity in Indonesia

CANBERRA (Agencies): The Australian government, becoming
increasingly concerned about its nearest neighbor's financial
instability, yesterday urged the International Monetary Fund to
be sensitive in its assistance to Indonesia.

"We believe that the International Monetary Fund's package
must be implemented with care and sensitivity towards the impact
of that package on social stabilities and social cohesion within
Indonesia," Prime Minister John Howard told parliament.

Howard also said he had written to international leaders,
including U.S. President Bill Clinton, on the need to organize
food aid for Indonesia, which has faced rioting over shortages
and soaring prices.

Relations between Indonesia and the IMF have become strained
after Indonesian President Soeharto was quoted on Sunday as
saying economic reforms prescribed by the IMF were not in tune
with the country's constitution.

The IMF has delayed the payment of about US$3 billion, part of
the total US$43 billion rescue package for Indonesia, until April
because of Indonesia's pre-occupation with politics as it forms a
new government.

The IMF and finance markets have also rejected moves by
President Soeharto to introduce a currency board to peg the
falling rupiah to a fixed exchange rate.

"We do understand the concern of the Indonesian government to
stabilize the rupiah," Howard said.

"I hope that the IMF review can be quickly concluded and that
a productive partnership between the IMF and the new Indonesian
government can be developed as quickly as possible."

Foreign Minister Alexander Downer said earlier on Monday he
believed the IMF delay was manageable, but warned of serious
consequences if Indonesia and the IMF refused to co-operate.

"If Indonesia were to walk away all together from the IMF, I
think the economic consequences for Indonesia would be very
serious," Downer said.

"On the other hand, I don't think it would be appropriate for
the IMF just to walk away completely from Indonesia, so we do
want the relationship to remain one that is in place."

The IMF said on Friday a successful review of the first
tranche of US$10 billion was needed before the fund could hand
over the second tranche, originally due on March 15.

It said the review would not be discussed until April.

Howard said he had written to international leaders urging
food aid support for Indonesia.

"Over the past two weeks I've discussed the matter with the
Prime Minister of Singapore (Goh Chok Tong) and with the
President of the World Bank (James Wolfensohn), particularly in
the context of organizing food aid for Indonesia," Howard said.

"I've also written again on the subject to President Clinton,
the Prime Minister of Japan Mr Hashimoto and also to President
Soeharto himself."

Howard said his treasurer, Peter Costello, had also been in
contact with IMF managing director Michel Camdessus over the
Indonesian rescue package.

Australia has contributed US$1 billion to the package and late
last month began talks with Indonesia about an emergency food aid
program.

Australia said yesterday it will underwrite up to US$380
million (US$253 million) in wheat exports to Indonesia to help
feed its people as the IMF delayed bailout funds for the stricken
Asian giant.

Prime Minister John Howard told parliament that the exports
would be guaranteed through the government's Export Finance
Insurance Corporation (EFIC) in a move which he said would
benefit both Australia and Indonesia.

"It will secure Australian jobs, but it will also be of
benefit to the ordinary people of Indonesia," Howard said.

Australia agreed in January to underwrite exports to Indonesia
on a case by case basis because of what it saw as bid by U.S.
exporters to exploit the crisis by grabbing traditional
Australian markets for agricultural products.

But the latest move comes amid fears that Indonesian buyers
will be unable to meet payments because of the plunging
Indonesian rupiah.

Japan warns

Meanwhile, Japan warned yesterday it may reconsider aid to
Indonesia if the government fails to abide by the IMF reform
package to revive its economy, a vice trade minister said.

"The IMF framework is right in its direction," Vice
International Trade and Industry Minister, Osamu Watanabe, told a
news conference.

"Japan may find it difficult to provide assistance," if
Indonesia fails to commit itself to the reform program, he
warned.

Indonesia has already received about three billion dollars
from the IMF under a $43 billion international rescue package
aimed at restoring confidence and stability to its markets and
economy.