Govt has 'no choice but to seek IMF aid'

Govt has 'no choice but to seek IMF aid'

YOGYAKARTA (JP): The government has no alternative but to
allow the International Monetary Fund (IMF) to intervene in the
country's currency crisis.

Economist Edy Suandi Hamid, from the Yogyakarta-based Islamic
University of Indonesia, said that acquiescing to IMF's
assistance would be much better than using the central bank's
reserves to shore up the falling rupiah.

Using the central bank's US$20 billion foreign exchange
reserves to fight speculative attacks on the rupiah could damage
the economy even further.

Thailand spent much of its forex reserves on fighting the
currency speculation but the crisis remained, he said, adding
that the country had finally turned to the IMF for help when the
use of its reserves failed to solve the problem.

"The Indonesian government didn't choose this alternative.
That means that the government is now ready to accept whatever
requirements the IMF imposes as a consequence of asking for
help," he said during a discussion held by the Yogyakarta-based
Center of Policy and Strategic Studies Wednesday.

Also speaking at the discussion were political analyst Amien
Rais and economist Revrisond Baswir, both from the University of
Gadjah Mada.

Edi said that the IMF's formula and recipes for mending the
country's monetary system could contradict with the vision of
most Indonesians because its solutions were generally based on
the conditions of developed nations.

He said that the IMF might demand economic reform in return
for its aid package, such as a cut in the government's subsidy on
domestic fuel sales, a rise in electricity tariffs and a cut in
budgetary spending as well as the tightening of bank loans.

The Indonesian government has a strong bargaining position and
can eliminate the pressure of IMF requirements because the
country's economic condition was much better than that of
Thailand, he said.

Indonesia's foreign reserves were, for example, still
sufficient to finance six months of imports and the overall
macroeconomic condition was still relatively good, he said.

"In other words, Indonesia still has the opportunity to take
domestic steps to solve today's economical problems," Edy said.
"The question is do we have the courage to do so?"

Revrisond Baswir highlighted the serious consequences of
inviting IMF to help Indonesia cope with its economic crisis.
Thailand, for example, had to change its constitution because of
IMF, he said.

"I'm not saying that Indonesia has to do the same because of
the IMF's intervention but, at least, something slightly below
that (step) is possible," he said.

Revrisond also criticized today's policies of handling a
crisis, which he said only reduced the pain rather than removing
the cause.

The rupiah has lost more than 35 percent against the U.S.
dollar since the speculative attacks hit the currency in early
July.

IMF, World Bank and Asian Development Bank (ADB) delegates are
now in Jakarta to assess Indonesian's aid requirements.

Neither IMF nor the government have named the aid figure,
however, analysts said that the aid package could be announced
soon. (23/swa)