Economist differ on the future role of IMF in Indonesia
Dadan Wijaksana, The Jakarta Post, Jakarta
The debates on whether the government should continue the existing International Monetary Fund program in the country were brought back to life again on Monday when prominent economists aired the need for an extension of the program to help instill investor confidence and avoid damage to the economy.
"We need to retain the current IMF program for another year, and then leave it to the next government to decide further steps. The best scenario for now is to stick to business as usual," said Mohammad Sadli, one of the country's respected economists, referring to the relatively stable macroeconomic condition gained through the IMF-sponsored reform program.
He was speaking during a seminar on a Strategy for Indonesia's Economic Development, held to commemorate The Jakarta Post's 20th anniversary.
He explained that failure to extend the current program when it expires later this year would create uncertainty among investors, thus risking another massive capital outflow as occurred during the late 1990s financial crisis.
Another prominent economist Djisman Simanjuntak shared Sadli's view, saying that the need for a continued IMF role was even greater next year when the general election is expected to take place.
He said that if the country's vision was to return to the path of high economic growth, and if success in doing so required an anchor of stability in a probably chaotic environment of the election year of 2004, then, "maintaining the IMF program for another year or two should be seriously considered. At least under the post-program monitoring (PPM) arrangement."
The remarks came as a campaign against the role of the Fund has been intensifying, with various groups saying that the economy would be better off without the IMF program.
The country is entering its final year of the IMF-sponsored aid program, which started in 1999. The People's Consultative Assembly (MPR) has ruled that the government should not extend the IMF program when it expires.
Under the IMF bailout program, the country can seek up to US$5 billion in loans in return for meeting a number of key economic reform targets.
The IMF assistance benefits the country not only in terms of financial aid, but also in terms of gaining crucial debt rescheduling facilities from foreign lenders under the Paris Club or the London Club whose judgments on Indonesia's economy are always based on the IMF's assessment.
Analysts have said that the cash-strapped government would lose around $3 billion worth of debt rescheduling facility next year alone, which would otherwise be available with the presence of the IMF.
What's more crucial, however, is the fact that parting with the IMF would risk market confidence in the country's economy. The question lingers on the government's ability to execute tough economic reform programs, without being closely watched by the IMF.
However, the above views were immediately challenged by Rizal Ramli, former chief economic minister and a staunch critic of the IMF, who said that to achieve higher growth, it would be better to completely terminate the IMF program.
"We are a resource-rich country. If we could take maximize advantage of that, who needs the Paris Club and others, we could even generate a huge fund of our own to stimulate the economy," said Rizal, also a speaker at the seminar.
Rizal is not alone. He joined another prominent figures who have long opposed a continued role of the IMF.
The mixed reactions have come as the government's stance itself over this issue remains unclear. A special team has been set up and is currently exploring options available for the country.