Australia's RBA urges fast aid for Indonesia
Australia's RBA urges fast aid for Indonesia
SYDNEY (Reuters): The Reserve Bank of Australia said yesterday the Indonesian situation was now so desperate that immediate pressure for structural reform had to be set aside for emergency measures.
In a speech peppered with medical allusions, deputy RBA governor Stephen Grenville argued the patient was so near death it was time to refocus the reform effort on the core economic issues -- the exchange rate, foreign debt and rebuilding the financial sector.
"To be sure, reform in the structural issues of governance is eminently desirable, but what is needed now is the kind of triage we see in an emergency room -- sorting the life-saving critical priorities from longer-term issues," he said.
Since Australia was Indonesia's next-door neighbor the stakes were higher for it than for the United States and other countries to see a resolution of the economic crisis, he said.
Indonesia is battling its worst economic crisis in decades and reforms agreed with the International Monetary Fund in exchange for a bail-out package of more than $43 billion have not been effective amid perceptions that Jakarta is dragging its feet on implementing the agreement.
Australia has pledged US$1 billion to the package.
"Our aim was not to capitalize on any of these countries' difficulties in order to bring about a political transformation," Macfarlane said.
"Whatever the details that are finally worked out, there can be little doubt that the overwhelming priority is to roll over, reschedule, restructure existing debt or do whatever else is necessary to prevent further capital outflow," he said.
The blunt warnings distanced Australia from most other western economies which were demanding Indonesia stick to the strict reform guidelines set by the IMF.
"It does seem the RBA is leaning toward the concept of an IMF- plus package which Indonesia has floated, which puts stabilization of the rupiah above everything," said Richard Gibbs, an international economist at Macquarie Bank.
Rescue funds
Meanwhile, a spokeswoman for Treasurer Peter Costello said in Canberra yesterday the Australian government would disburse its US$1 billion in aid funds to Indonesia once the overall IMF package was accepted by the government of President Soeharto.
The spokeswoman said reports on some wire services that Australia was withholding the payment were incorrect as the payment had always been linked to acceptance of the IMF package.
"This is a normal practice. He (Costello) has said consistently that it's contingent on Indonesia implementing the IMF package," she said.
In other development, a diplomatic source in London said on Wednesday, Japan will urge Indonesian Soeharto this weekend to adopt International Monetary Fund measures in effort to ensure Asia's economic crisis does not turn into a political crisis,
Earlier on Wednesday Japan announced that Prime Minister Ryutaro Hashimoto will travel to Indonesia this weekend for talks with President Soeharto about the country's economic crisis.
"Mr Hashimoto will convey the expectation of the Japanese government that Indonesia should implement the IMF program, and at the same time make it clear that the Japanese government continues to support reform efforts by Indonesia" the diplomatic source said.
Meanwhile, Thailand's Prime Minister Chuan Leekpai said in New York on Wednesday there is no alternative source of funding for Indonesia but the IMF.
"There are no other alternative resources of funds able to assist Indonesia, apart from that available to the IMF," Chuan told the Council on Foreign Relations.
"It is essential for the IMF to assist Indonesia and, at the same time, it is essential for Indonesia to receive and to welcome IMF support," Chuan also said.