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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