Ending program an indication of success: IMF's Citrin

The Jakarta Post, Jakarta

The International Monetary Fund (IMF) approves plans by the government to end the fund's current bailout program when it expires later this year, saying it indicates the success of the program.

Daniel Citrin, senior advisor to the IMF Asia and Pacific Department, said, "Ending the IMF program, if that's the course the country takes, is a sign that recovery has reached a mature phase."

"The country is now at a point where, upon the expiration of the current IMF-supported program at the end of 2003, it may be possible to forgo another arrangement with the IMF," Citrin told the latest edition of IMFSurvey.

Under the IMF lending program, which started in 1998, the fund has provided some US$5 billion in fresh loans, disbursed periodically, pending the government's ability to meet a set of phased economic reform targets.

As the program is set to expire by year-end, the government is currently exploring options available to end the program, without creating harmful consequences for the economy.

After a slow start, Citrin admitted that the government had made significant progress in the implementation of the reform programs over the past couple of years.

As a result, not only has the country's macroeconomic situation been stabilizing -- as seen in benign inflation and a strong showing of the rupiah -- the budget's fiscal sustainability has also been maintained.

Progress has also been observed in the restructuring of the country's banking sector, he added.

Lagging behind was the acceleration of reform in the legal area, a discouraging factor for the return of investment to the country, both foreign and domestic, badly needed to push economic growth to a level that could generate more jobs for millions of unemployed Indonesians, he said.

Now that the IMF was leaving, the country had to push through legal reform and anticorruption measures, and make sure its labor regulations and decentralization did not deter investors, Citrin said.

With regard to the options available post-IMF, Citrin said the fund would leave it all to the government, adding, "whatever our formal relations may be, the IMF will do whatever it can to support Indonesia."

"The most important thing is that Indonesia's policy course needs to be what it is, with or without an IMF-supported program. Ultimately, it's all about its policy and performance."

Without an IMF program, the country would lose its foreign debt relief facilities from creditors grouped in the Paris Club, which is willing to provide support only if an IMF program were in place.