Government not seeking major changes in reform program
JAKARTA (JP): The Cabinet's new economic team is not seeking major changes in the International Monetary Fund-sponsored economic reform program, Bank Indonesia acting governor Anwar Nasution said here on Thursday.
"There will be no major changes in the (IMF) program," he said following a meeting between the new economic ministers and representatives of multilateral institutions, including the IMF.
Anwar did not specify what changes would be made, but he said government spending would focus on empowering the poor and developing infrastructure in rural areas.
"The changes don't mean go to hell with the IMF," he said. "It is entirely wrong for you to label Rizal as anti-IMF. He's a pro- market person just like me," he added, referring to Coordinating Minister for the Economy Rizal Ramli.
Rizal's past criticism of the IMF-supervised economic reform program has earned him the reputation of being anti-IMF.
Soon after his appointment as the country's new economic czar last Thursday, Rizal said he wanted to see some changes in the IMF economic program and in the role of multilateral institutions in the country.
In a phone conversation with IMF deputy managing director Stanley Fisher earlier this week, Rizal again expressed his intention to review the reform package because conditions had changed considerably since the last review of the program was undertaken in June.
Talk of changes to the IMF-sponsored economic program has unnerved the financial market over the past several days, causing the rupiah to decline against the U.S. dollar, albeit slightly.
But most analysts believe the government will not make major changes to the reform program.
The deputy director for the IMF in Asia Pacific, Anoop Singh, arrived in Jakarta on Wednesday to discuss with Rizal and other members of the economic team the planned changes.
But Singh declined on Thursday to comment on the meetings, saying he would hold further discussions with Rizal on Friday.
Singh, however, did say the IMF and the new economic team had reached a "basic agreement".
In a joint media conference with representatives of multilateral institutions, Rizal said the Cabinet's new economic team remained committed to the IMF reform program and would even step-up its implementation to accelerate the country's economic recovery.
"There's a new enthusiasm that Indonesia can recover quickly with the support of multilateral institutions .... We are looking forward to an improved implementation of the program," he said.
In response to Rizal's statements, Singh said: "You told us that you want to accelerate Indonesia's recovery; we support this.
"Second, you have told us that you intend to intensify the implementation of the economic program ... we support this.
"You want to increase ownership of the program; we support this .... We want to convince you that the IMF will fully support the new economic team," Singh said.
The World Bank country director for Indonesia, Mark Baird, said: "It's clearly very important for Indonesia to push ahead with the implementation of the reform program as quickly as possible ... particularly in corporate restructuring.
"I think what would come from this is not only growing confidence in the market that Indonesia is on the path of recovery, but also a real benefit to the people of Indonesia.
Anwar said a delay in the next disbursement of the IMF loan to the country would not affect Indonesia's balance of payment.
"I think any delay of the IMF board meeting would only be around two weeks. It's surely not the end of the world for us," he said.
Rizal has asked the IMF to delay its board meeting, initially scheduled for Thursday, to allow the new economic team to study the letter of intent (LoI) sent to the IMF by the previous economic team in late July.
Rizal said the new team wanted to study the conditions of the LoI in order to work out a plan to increase the country's ownership of the program.
The IMF board must approve the LoI, which basically outlines the economic programs to be implemented by the government within a certain time period, before it disburse its next loan tranche of about US$400 million.
The IMF pledged in January some $5 billion in bailout funds to help finance the country's three-year economic reform program. So far, the IMF has disbursed about $700 million of this promised money.
Separately, noted economist Emil Salim supported Rizal's intention to review the present economic reform program.
"The present LoI was signed by the old economic team. Rizal's team is new, so it's only normal that he would want to review the agreement," he said.
He added that economic conditions had changed since the previous economic team and the IMF signed the LoI. (rei/bkm)