Australian academics criticize IMF

Australian academics criticize IMF

CANBERRA (Reuters): The International Monetary Fund was accused of mismanaging and even exacerbating Indonesia's economic troubles during an academic seminar on the Asian currency crisis in Canberra yesterday.

Ross McLeod, an academic in the Indonesia Research Project at the Australian National University's economics division, said the IMF has mishandled the Indonesian situation and taken the country from a bad economic crisis to a worse political crisis.

"The crisis is not yet solved. As long as the IMF has been there the crisis has gone from bad to worse to really terrible," said McLeod, speaking at the public seminar on the currency crisis and its impact on Australia.

"I think we can now say (the IMF) package has failed in the sense that the rupiah has not recovered and there is no end in sight. What began as a financial crisis ... has been very badly mismanaged. It has now become a fully fledged political crisis."

McLeod defended President Soeharto's proposal to implement a currency board to peg the rupiah to the U.S. dollar, saying it should not be dismissed as an alternative to the IMF without further study.

"The resolution to the crisis must involve the rupiah strengthening a great deal. Somehow that needs to be made to happen (and) the currency board idea is one alternative which hasn't been given proper consideration."

He said the IMF was using the crisis to impose long-sought- after economic reform on Indonesia.

"It seems to me that the IMF has seen in this crisis an opportunity to hit Indonesia, or specifically the President, while he's in a weak position," McLeod said.

"The IMF has virtually imposed a whole stream of micro- economic reforms on Indonesia which (it) has been asking for many years."

He said two paths to Indonesia's restoration lay ahead: a long, slow grind to recovery or a revolution to overthrow the current government and "start from scratch".

Alan DuPont of the university's strategic and defense center said he had no doubt the situation in Indonesia would deteriorate further, with social and political tensions rising.

But if the unrest led to an exodus of people from Indonesia they would more likely flow north into Malaysia, with its familiar language and culture, rather than Australia, he said.

Western officials are concerned regional stability could decay if Soeharto continues to avoid IMF reforms and they have called on the IMF to give Indonesia a more flexible package to avoid further civil unrest from soaring food prices.

The IMF has provided a US$43 billion bailout package for the beleaguered country, which has seen a 70 percent devaluation in its rupiah currency since the crisis began. Australia has pledged $1 billion to the IMF package.

In Paris, French Finance Minister Dominique Strauss-Kahn urged yesterday the Indonesian government to implement economic reforms laid out in an IMF package.

There is "no other solution but to implement the main points" of the reform program agreed with the IMF as a condition for a multibillion dollar international aid package, Strauss-Kahn told a press briefing.

If the program is not implemented "it will be serious for Indonesia but could also have an effect on the overall stability of the region which is beginning to recover," he said.