Fuad gives his word RI won't backtrack

By Yenni Djahidin

WASHINGTON D.C. (JP): The government reiterated here Friday that it would carry out all the economic reform programs it had worked out with the International Monetary Fund this month to lift the country out of the present crisis.

"Indonesia is determined to regain the confidence of the international community through a more open economic system," Minister of Finance Fuad Bawazier told reporters.

"Once fully implemented, the programs will greatly increase transparency in all economic matters, substantially remove monopolies and oligopolies and strengthen our financial system," Fuad said after attending a spring meeting at the World Bank.

The government would fully implement the IMF measures in a timely manner, he said in response to questions of the possibility of the government once again backtracking on its pledge.

"You can have my words, but I would also like to ask that you judge us on our actions," he said at the media conference also attended by Bank Indonesia Governor Sjahril Sabirin and Indonesian Ambassador to the United States Dorodjatun Kuntjoro- Jakti.

Fuad said talks between Indonesian borrowers and international lenders in New York had gone well.

"They basically have set up a framework but details certainly need to be followed up in the next few weeks and months," he said of the negotiations to resolve the $73 billion debt mountain that Indonesian companies have not been able to repay.

He admitted that the stumbling block was the lack of an effective and modern bankruptcy law in Indonesia. The law was now being prepared and reviewed prior to submission to the House of Representatives, he added.

When asked about the Currency Board System (CBS) of pegging the rupiah to the dollar, Sjahril said the idea was no longer on the agenda. "We are now implementing the IMF package," he said.

Consideration

The CBS, a concept proposed by American economics professor Steve Hanke, was given serious consideration by the government last month as it struggled to strengthen the rupiah, which at one point lost more than 70 percent of its value since the crisis began in July.

In February, Hanke was retained by President Soeharto as his economics advisor to look into the proposal as an earlier IMF reform package failed to arrest the rupiah's decline.

Sjahril declined to answer a question about Hanke's present status with the Indonesian government.

"He (Hanke) was a counselor when we were considering various alternatives."

"The stabilization of the rupiah is part of the IMF package right now which was kind of neglected in the beginning," he said.

The IMF has organized a $43 billion rescue package for Indonesia but insisted on more than 100 tough conditions, including sweeping economic reforms.

It withheld the disbursement of the second $3 billion tranche, originally due in March, pending a more convincing demonstration of the government's commitment to implementing the reforms.

IMF Asia director Hubert Neiss was quoted by Reuters as saying Friday that a decision on whether to release the next tranche of its $10 billion loan to Indonesia was possible, but not likely, in the next two weeks.

Neiss told reporters the loan would be released after an IMF board meeting, but no date had yet been set for it.

Sabirin said the monetary authorities were ready to raise interest rates further to keep reform efforts on track and support Indonesia's currency.

"The exchange rate has been unrealistic ... this is truly out of line," he said. "So it is our aim to reach an exchange rate for the rupiah which is more in line with the basic strength of the Indonesian economy."

"If it is necessary, we'll adjust interest rates. If there is a need for a further increase, then we'll do so in order to support the exchange rate," he added.