Govt denies IMF dictated reform package content

Govt denies IMF dictated reform package content

JAKARTA (JP): The government has denied accusations that it
allowed the International Monetary Fund (IMF) to dictate the
content of last week's economic reforms in return for the US$43
billion international rescue package.

The State Minister of National Development Planning, Ginandjar
Kartasasmita, told reporters Saturday that the 50 points
contained in the memorandum given to the IMF were all in line
with the government's intentions for the economy.

Indonesia, he said, was benefiting from the experience and the
international reputation of the IMF in handling similar economic
crisis in other countries.

"If the IMF is convinced about the reform plans, then it would
influence sentiments in the global financial markets," he said.

Ginandjar said Indonesia was not the only country to have
accepted a bitter IMF prescription, noting South Korea and
Thailand were among its most recent other patients.

"That's the normal procedure. When a country is seeking
assistance, the IMF will spell out its terms, before giving
assistance," he said.

President Soeharto signed a letter of intent Wednesday and
delivered it to IMF managing director Michel Camdessus. He
pledged to carry out sweeping economic reforms that include
dismantling business monopolies and cartels, eliminating most
fuel subsidies and opening up more of the economy to foreigners.

Some politicians are wary that by agreeing to the tough
economic terms, such as the elimination of subsidies, the
government virtually yielded its sovereignty to the IMF, and
sacrificed the interests of the people.

But Ginandjar said the IMF had no political motives in setting
its terms. "After learning the terms, the President felt they
could be carried out," he said.

Soeharto also has to revise the government's draft budget for
the 1998/99 fiscal year, which he had presented to the House of
Representatives on Jan. 6, in view of these reforms.

Ginandjar said the draft would have to be revised quickly,
before March, before being presented to the House once again.

The draft budget for the fiscal year starting April 1 will
have to be passed by the House.

The original budget called for expenditure of Rp 133.5
trillion, up by 32 percent from the current fiscal year. It was
calculated on the basis of an exchange rate of Rp 4,000 to the
dollar, an inflation rate of 9 percent and a 4 percent economic
growth rate.

These assumptions were regarded as ambitious by the IMF.
Soeharto agreed to change them, altering the budget to an
exchange rate of Rp 5,000 to the U.S. dollar, 20 percent
inflation and zero economic growth.

Soeharto also said that by IMF calculations, the budget would
have a deficit equivalent to 1 percent of the country's gross
domestic product, but the shortage would be covered by foreign
aid, and not by domestic borrowings.

By law however the government cannot run a deficit in its
budget. (prb/09)

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