Commitment to reform key to graduate from IMF

Commitment to reform key to graduate from IMF

A'an Suryana, The Jakarta Post, Jakarta

The government must prove it has the political will and
discipline to continue implementing difficult economic reform
measures if its wants the country to graduate from the
International Monetary Fund (IMF) economic reform program,
economists say.

Anton Gunawan, an economist at Citibank, said on Tuesday that
strong commitment to the reform program was necessary to maintain
the support of the IMF in crucial debt rescheduling talks with
foreign creditors.

He was responding to a report in this paper that the country
could leave the IMF's "intensive care unit" next year amid
positive progress in macroeconomic indicators.

But Anton said that achieving a stable macroeconomic condition
was not enough to justify the country leaving the IMF reform
program.

"Indeed, macroeconomic indicators are improving. But, the
government must continue to work hard to show that Indonesia is
seriously implementing sound economic reforms," he said.

Macroeconomic indicators such as inflation, interest rate and
exchange rate of the rupiah against the U.S. dollar have been
improving since the beginning of this year. The IMF has even
praised this development.

The current three-year IMF reform program was supposed to end
in November this year, but the government decided earlier this
year to extend it until the end of 2003 as part of a condition to
obtain rescheduling facilities from the Paris Club of creditor
nations for some US$5.4 billion in sovereign debts maturing in
2002 and next year.

The Paris Club requires the IMF support to grant the
rescheduling facility. Economists have said that the country
would still need such a facility in 2004 to help avoid fiscal
disaster.

Indonesia can still maintain the support of the IMF in the
debt rescheduling talks with the Paris Club only if it leaves the
IMF program in an "orderly fashion," experts have said.

"That's why the government must be able to demonstrate to the
IMF and the international community that it is serious in
implementing the reform programs," said Pande Radja Silalahi, an
economist at the Center for Strategic and International Studies
(CSIS).

"The government must immediately prepare an exit strategy," he
added.

Anton, however, said that so far the signs were discouraging.
He pointed out that the government had been slow in carrying out
key asset sales, which were crucial to help revive investors
confidence in the economy.

Economists said that if Indonesia could leave the IMF
intensive care unit in an orderly manner, it would send a
positive signal to investors, which in turn would help improve
the country's sovereign rating.

Improvement in the country's rating would help encourage
investors to return here and would help ease costs to the local
corporate sector in raising funds for working capital overseas.

Pande said that the government must start holding bilateral
talks with major creditor nations to maintain their financial
support once the country leaves the IMF program.

The financial support of these creditors was crucial because
the state budget would continue to be heavily burdened by the
huge cost of the late 1990s bank bailout program, he said.

He added that another strategy was to seek ways to boost tax
revenues to fund the state budget.