Experts say country still needs the IMF

Experts say country still needs the IMF

A'an Suryana, The Jakarta Post, Jakarta

The role of the International Monetary Fund (IMF) to oversee the
country's economic reform program is still crucial to help
maintain investor confidence in the economy, a seminar concluded
on Wednesday.

But participants of the seminar said the government had to
modify the IMF's current role in such a way that the fund would
no longer dictate every detail of the economic reform programs
Indonesia needs to implement. The function of the IMF should only
be limited to a monitoring role, they said.

"The recommendations of the IMF are still needed to secure
investor confidence, particularly the Paris Club," said Umar
Juoro of the Habibie Center, a private think tank, which
organized the seminar on Wednesday.

The IMF came to Indonesia in late 1997 after the country was
hit by a regional economic crisis. In 1999, the government
extended the IMF bailout program, which will expire at the end of
this year.

There has been strong political pressure on the government not
to extend the IMF's role when the program expires, with critics
saying that the IMF's prescriptions have only worsened the
country's economic woes.

An immediate consequence of ending the current IMF program
would be that the country could no longer obtain a debt
rescheduling facility from the Paris Club of creditor nations and
the London Club of foreign private lenders, who have always based
their decisions on recommendations made by the IMF. Thus, this
could create serious difficulties for the cash-strapped
government to repay foreign debts maturing in 2004 and in the
years to come.

The government has formed a special team to explore various
options if it has to conclude the existing IMF program.

A source at the Ministry of Finance said that one possible
option was to modify the current role of the IMF. He said that
the presence of the fund was still needed to maintain credibility
in the government's economic reform programs.

Some analysts have said it was hard to imagine the country
having the discipline to carry out tough reform programs without
a credible institution overseeing it, particularly next year when
a general election will be held.

Andrinof A. Chaniago, an economist with the Center for
Indonesian Regional and Urban Studies (CIRUS), said at the
seminar that the IMF should no longer be deeply involved in
designing all aspects of the country's economic reform programs
in the future.

He said that the IMF's core competence was in the area of
monetary policy.

He said that what the IMF had done in the past by intervening
in microeconomic areas was a mistake. One example was the closure
of certain banks in November 1997, which led to massive runs on
banks.

"The IMF should now only concentrate on monitoring the
monetary policy," he said.

Umar said that from the perspective of nationalism, the
current dominating role of the IMF was unacceptable.

"It would be very difficult to convince people, especially the
legislators, if they knew that the policy was dictated by a
foreign institution," he said.