Dorodjatun confirms RI ready to end IMF program

Fabiola Desy Unidjaja and Fitri Wulandari, The Jakarta Post, Jakarta

Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti confirmed on Monday that the government was ready to end the existing International Monetary Fund economic bailout program.

He said that looking at the positive developments in a number of key economic indicators, he was convinced that the economy would be able to survive the post IMF period.

"The Indonesian government has the right to end the program with the IMF as mandated by the People's Consultative Assembly (MPR)," Dorodjatun told reporters after a meeting with Vice President Hamzah Haz and a special government team assigned to evaluate exit strategy options from the current IMF program.

"The government has prepared strategies for the future not only for the 2004 state budget, but also a mid-term strategy," he added.

Dorodjatun's statement came only a few days after Vice President Hamzah Haz stressed the government's determination to end the five-year IMF program. This was the first official statement on the issue.

Since the MPR issued a decree suggesting that the government not extend the current IMF program when it expires later this year, there has been hot public debate on whether the government should end the program or extend it for another short period given the financial consequences of the first alternative to the state budget and the economy.

Some analysts have said that without the presence of the IMF in designing and monitoring the country's economic reform program, Indonesia would no longer be able to obtain debt rescheduling facilities from both the Paris Club of creditor nations and the London Club of private creditors. Next year alone, the country must repay some $3 billion in debts to the foreign creditors. This would create a serious fiscal gap and thus affect the performance of the overall economy.

But Dorodjatun said that the government was now more confident about parting with the IMF amid several positive indicators in the economy.

He pointed out on the significant increase in foreign exchange reserves now standing at around $33 billion; and the relatively stable exchange rate of the rupiah against the U.S. dollar.

He added that the country's small and medium-sized enterprises would also receive a total of Rp 42 trillion in loans from the central bank, much higher than Rp 30 trillion allocated for last year. This should help push economic growth.

"The government is safeguarding the economic momentum and positive record so that economic growth will continue to be positive and better ahead of the 2004 general election," Dorodjatun said.

Minister of Finance Boediono acknowledged that exiting from the IMF program would cause a fiscal gap, saying that his office and the central bank were still calculating the cost to the state budget.

"There will be financial gap, and Bank Indonesia is calculating it to make a projection and preparations," Boediono said.

Neither Dorodjatun nor Boediono, however, would say whether the country would still invite the IMF to play a monitoring role or would completely break away from the Fund.

IMF presence for the last five year has been important to maintain international creditors and investors.

Economists have urged that Indonesia join the IMF post-program monitoring arrangement. Under the arrangement, the Fund will monitor the government's self-designed economic reform program and not design it as it does at present.