Fischer urges continuity with IMF-prescribed programs

JAKARTA (JP): The International Monetary Fund's first deputy managing director, Stanley Fischer, said on Friday he was heartened by the outcome of Indonesia's June 7 general election, which passed peacefully, and with the improving economic picture.

However, he emphasized that the new government would need to continue the IMF-prescribed economic reform programs to ensure international support and a sustainable economic recovery.

"If the next government follows the policies that we've agreed on then we'll continue to support Indonesia," he said after meeting with President B.J. Habibie a few hours after his arrival

Fischer, here on a two-day visit, is to meet political leaders on Saturday, including popular opposition leader Megawati Soekarnoputri, whose PDI Perjuangan party is the front-runner in the elections.

Fischer is accompanied by IMF Asia-Pacific director Hubert Neiss, who arrived on Thursday.

Fischer said his visit was to reiterate the importance of continuing the economic reform programs, particularly the restructuring of the financial and corporate sector, as well as the recovery of massive problem loans owed to domestic banks.

He said Indonesia needed to work harder to recover the loans to support the costly bank restructuring program.

The IMF has been supporting a multi-billion dollar bailout for the crisis-hit economy.

Fischer said he was happy with the nonviolent polling process, and that he expected a smooth political transition.

He said developments on the economic front were encouraging, pointing out the strengthening of the rupiah and the stock market.

"The economy has begun to grow in the first quarter and prospects for the (economic) recovery in the second half of the year are good."

He predicted the rupiah would continue to strengthen against the U.S. dollar, despite recent strong rallies.

The rupiah closed slightly lower in quiet trading on Friday at Rp 7,295 to the dollar, compared to Rp 7,280 on the previous day.

"There's more room for the rupiah to appreciate," he said.

Fischer called on investors to return to the country amid the improving political and economic conditions.

"It's time for investors to come back," he said upon arrival at Soekarno-Hatta International Airport.

Fischer said a remaining uncertainty was the country's presidential election in November.

Indonesia held its first free general election on June 7 after more than 30 years under the authoritarian rule of former president Soeharto.

The IMF has been concerned with statements made by Megawati's top economic adviser, Kwik Kian Gie, who has said the country's economy would be better off if the rupiah was pegged at a fixed rate to the U.S. dollar. But Kwik has also said PDI Perjuangan would not implement such plans without IMF approval.

"The current exchange rate arrangement is working very well, it has shown resiliency, and the rupiah is strengthening. That is good for the economy," Fischer said.(rei/prb)