Govt determined to part with IMF: Hamzah

Govt determined to part with IMF: Hamzah

Fitri Wulandari, The Jakarta Post, Jakarta

The government is determined not to extend its agreement with the
International Monetary Fund (IMF), due to end this year, Vice
President Hamzah Haz said on Friday.

"The government is determined to end the IMF (agreement). But
we have to prepare ourselves for that. It means we have to tap
domestic resources," Hamzah said after Friday prayers at Al Falah
Mosque, Tangerang, Banten.

Hamzah added that if the government wished to extend the
agreement, then it would have to be discussed with the People's
Consultative Assembly (MPR), as the MPR annual session last year
had clearly ordered termination of the IMF program.

Hamzah's comment is the first official statement regarding the
issue of IMF program termination.

The Vice President recognized that ending the IMF program
would mean that Indonesia would have to repay about US$6 billion
to $7 billion in outstanding debt to the IMF.

Indonesia's foreign exchange reserves stood at US$33.6 billion
as of the end of April.

Hamzah also expressed his confidence that, without the IMF,
Indonesia's fiscal status and balance of payments would remain
safe, provided that the domestic security situation remained
stable and exports increased.

"The problem in Aceh should be resolved quickly so as not to
become a burden. The banking sector should start extending
credits to improve the real sector," he was quoted as saying by
detik.com Internet news portal.

The government plans to launch a military operation in Aceh to
quell a separatist movement in the restive, resource-rich
province.

Meanwhile, analysts said military operations in Aceh would
create new security uncertainties, possibly increasing next year,
at the very time the country would be participating in
legislative elections and the first-ever, direct presidential
election.

With such increasing uncertainty, a number of economists have
suggested that the government extend the IMF program, at least to
maintain creditor confidence in Indonesia.

Economist Fauzi Ichsan from Standard Chartered Bank said that
once the IMF exited from the country, the international community
would question Indonesia's seriousness in carrying out its own
structural economic reform programs.

"At present, international creditors and investors still have
the confidence that Indonesia can carry out its economic reforms
because the IMF is watching the process," Fauzi told The Jakarta
Post.

Economist Pande Radja Silalahi, from the Centre for Strategic
and International Studies (CSIS), said he doubted that the
government would seriously implement structural economic reforms
once it terminated the IMF program.

He argued that even during the IMF's five-year "tutelage", the
government had dragged its feet when it came to implementing the
structural economic reforms set out in the government's letter of
intent to the IMF.

"If the government had been serious in carrying out economic
reforms in the past, we would have 'graduated' from the IMF
sooner and not be dragging on like this, a situation that is
costing us dear," Pande said.

IMF loans to the country are tied to the government's
commitment to implementing economic reforms.