Government to set up special team to assess IMF role in Indonesia

Dadan Wijaksana, The Jakarta Post, Jakarta

Finance minister Boediono said on Monday the government plans to set up a special team soon to review the results of reform programs the government has carried out under the International Monetary Fund (IMF).

The team will be tasked to explore the possibility of whether Indonesia is financially competent without support from the international community, Boediono said.

"They will examine the costs and benefits of our program with the IMF," he was quoted as saying by Antara, adding that the government would meet with the House of Representatives and economic experts early next year to discuss the plan.

Consequently, assessments on whether the country still needs an umbrella to boost international confidence -- much like the current role of the IMF for Indonesia -- would also be conducted, Boediono added.

Although details remain sketchy, his remarks should serve as an indication of preliminary preparations on part of the government in entering the final year of the current four-year financial assistance program with the IMF.

Under a US$4.8 billion loan program, IMF assistance to Indonesia is scheduled to terminate by the end of next year. Signed in 1999, the program was to have ended in December this year, but the government had extended it for another year. Of the total, the country has so far secured $3 billion from the fund.

The program is meant to help Indonesia, hard hit by the severe financial crisis in late 1997-1998, get back on track towards recovery.

The government has claimed the program benefits the country not only in terms of financial aid, but also in terms of gaining support from other foreign countries and institutions, whose judgments are always based on the IMF's assessment.

Entering the fifth year of the program however, Indonesia's recovery has yet to move at full swing. Concerns have been voiced that Indonesia might need to re-extend the program in order not to lose its reform momentum, but this scenario would definitely draw furious criticism.

Despite having a year left under the contract, debates over the need for Indonesia to continue its relationship with the IMF has been mounting already.

Outspoken State Minister of National Development Planning Kwik Kian Gie and speaker of the People's Consultative Assembly Amien Rais are among those who have blatantly attacked the IMF's role in the country. They argue that the country would be better off without the IMF, which they claim to have pushed the country into deeper crisis.

According to research conducted by an international securities firm, Indonesia can free itself from the IMF without harmful consequences, as long as it maintains its reform program.

Indonesia could put an end to its relationship with the IMF in the third or fourth quarter of next year if progress can be made in its area of reform, ING Securities said recently.

This is echoed by David Nellor, the current IMF representative to Indonesia, who recently expressed his vote of confidence in the country that it would graduate from the fund, given time.

Hubert Neiss, the former top executive of the IMF during the program's early years in Indonesia, told The Jakarta Post that the country has a good chance of leaving the program successfully provided "the government make further substantial progress."

A benefit to Indonesia from ending its dependency on the IMF is an improvement to the country's sovereign rating.