Economists hail IMF plan to stabilize rupiah
JAKARTA (JP): Economists and analysts hailed yesterday the government's plan to seek support from the International Monetary Fund (IMF), saying it should help tackle the current currency crisis.
Economists Christianto Wibisono, I Nyoman Moena and Raden Pardede agreed that the decision was the best alternative in view of the crisis.
"There is no other choice but to seek IMF help. It's a matter of survival," said Christianto, head of the Indonesian Business Data Center.
The crisis, if not dealt with properly and quickly, could lead to political instability, dangerous to the convening of the People's Consultative Assembly next March, he said.
Nevertheless, he continued, he saw no political motive behind the decision, but a pure "technical" measure to heal the country's ailing economy.
President Soeharto endorsed a decision yesterday to seek outside help, including from the IMF, to restore confidence in the battered rupiah.
But no details were given on how much assistance would be sought or in what form.
But analysts said any package would be far less than the US$17.2 billion received by Thailand, the first Southeast Asian nation to turn to multilateral agencies after its currency was browbeaten.
Danareksa Sekuritas economist Raden Pardede said the government's newest move would help restore confidence, especially among local companies which had rushed for U.S. dollars over the past few weeks.
"The move is good. Otherwise, Indonesia will run into trouble if it does not seek assistance from such an international institute," he told The Jakarta Post.
Both Raden and Christianto predicted that the IMF would impose tough measures on Indonesia like fiscal tightening, including expenditure cuts and the removal of oil and electricity subsidies.
Christianto said it would be rather encouraging for Indonesia's future if the move brought about much-needed structural reform in the economic front.
He predicted that the IMF might demand for the elimination of monopolies and other economic distortions in return for its financial help.
But Nyoman Moena, chairman of the supervisory board of the National Private Banks Association, said that the IMF would not impose many conditions on Indonesia, considering that Indonesia's economy was not as bad as Thailand's.
"Unlike Thailand, Indonesia is not actually in dire need of such help. Therefore, it has some bargaining position not to accept all IMF conditions, if there are any," he said.
And there would be no reason for the IMF not to help Indonesia considering that the Indonesian government had implemented all prudent macroeconomic management as required by IMF.
"We have had a balanced budget and free foreign exchange regime, managed to achieve low inflation and high growth and met all international obligations on time for 30 years," Moena said.
Nevertheless, it was Indonesia's right, as an IMF member, to seek its help, and it was IMF's obligation to help Indonesia to deal with the current problem, he added.
He said a persistent weakening of the rupiah over the past few weeks was largely attributed to the increasing demand by local corporations to purchase dollars to refinance their dollar debts.
The rupiah reached a historic low of 3,850 against the U.S. dollar on Monday, and some analysts forecast it could easily drop to the 4,000 level if the government did nothing to shore it up." said a local bank dealer. (aly/jsk/rid)
IMF -- Page 10
Rupiah -- Page 11