Economist differ on the future role of IMF in Indonesia

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.