CBS, Indonesia and the IMF
Almost everyday I read about the CBS. How good it is, how risky it is, how dangerous it is, and many other different comments, which make my head spin and creates more confusion.
For me, it is really strange how an American professor from John Hopkins University suddenly appears in Indonesia's financial community and, in no time, rises to prominence by introducing a currency board system (CBS). Rumors abound that Prof Steve Hanke was brought to Indonesia by Peter Gontha, but Gontha denied this out of hand at his "meeting of minds" about the CBS organized by RCTI on Feb. 20, 9:30 p.m. And this denial makes it more mysterious.
I followed with great interest the "meeting of minds" and it was a real meeting of great financial minds because we saw Peter Gontha, Sugeng Suryadi, Kwik Kian Gie and Dr. Nasution, and the discussions were really of high quality. I didn't hear repetitions of known slogans and statements, but real arguments, which made the moderator rather speechless.
One thing attracted me, and that was Kwik's explanation about the necessity of having enough foreign reserves to really stabilize the rupiah. He said that when the government announces the fixed rate, then you must be prepared to see a rush in dollar buying, and with the US$17 billion we have at this moment, this could be disastrous, because in no time the foreign reserve will be finished and the hands of the banks will be tied. So in my mind (if my conclusion is correct) we should have adequate foreign reserve first and then everything will run smoothly as planned.
After hearing this remark, my mind goes to the IMF, which came here to help Indonesia overcome its crisis. The IMF spirit is to help and not to dictate how Indonesia should run its economy or its affairs. After all, Indonesia is a free and sovereign country and its sovereignty should be honored by all.
The IMF could say to Indonesia that the IMF has $43 billion to help Indonesia and that Indonesia can use it any time it needs. Then, I think, the problem of foreign reserve will cease to be a problem.
After all, what we get from the IMF is a loan, and the sooner Indonesia recovers, the sooner the debts will be repaid. But again, this is only a simple contribution from a person who knows next to nothing about finance and economics. With or without the CBS, Indonesia must recover, not only for the sake of Indonesians, but for the sake of the world community as well.
SOEGIH ARTO
Jakarta