Govt to consult IMF on CBS plan, minister says

Govt to consult IMF on CBS plan, minister says

JAKARTA (JP): The government will consult the International
Monetary Fund (IMF) over its plan to adopt a currency board
system which would peg the rupiah to a fixed exchange rate, the
state minister of national development planning said yesterday.

Ginandjar Kartasasmita told a hearing with the House of
Representatives Commission VIII that the CBS was one of several
alternatives being considered by the government to shore up the
rupiah.

"The most important thing now is to bring the rupiah's value
to a normal level. The IMF's economic reform package has not had
the desired effect," he told the commission dealing with
financial matters as reported by Antara.

The IMF, he added, had not been able to guarantee that its
reform package would restore the rupiah's exchange rate.

"We have complied with their (IMF) terms ... We have adjusted
our budget. But the rupiah remained low," he said.

Briefing the commission on the system, Ginandjar said no
currency system was perfect, but the CBS concept had proven
capable of solving monetary crises in Argentina and Hong Kong.

On the controversy surrounding the plan, he said: "We should
look at this with a cool head, and find the best options."

The government has disclosed its intention to adopt the CBS,
with analysts predicting the rupiah would be pegged to a level of
Rp 5,000 to the American dollar, compared to Rp 10,000 yesterday.

The CBS concept has gained currency particularly among
business owners who are overwhelmed with foreign debts which they
cannot hope to repay at the rupiah's current exchange rate.

Many economists, including the IMF, however warn that the CBS
cannot be put in place in Indonesia unless it tightens its
banking system first and restores confidence in the rupiah.

Under the system, money supply must be fully backed by foreign
reserves in the currency to which the rupiah is pegged.

Ginandjar refused to comment on a report by the Washington
Post suggesting that IMF managing director Michel Camdessus had
written to President Soeharto criticizing the currency board
plan.

The report said that in the letter Camdessus threatened to
withhold further disbursement of the $43 billion rescue package
that the IMF organized for Indonesia.

The IMF has not commented on the letter.

Ginandjar said: "We shouldn't make statements in haste. If it
turns out that the IMF (managing director) never said those
things, it will only worsen the economic condition."

But he added that anyone opposed to the CBS should come up
with an alternative solution to restore the rupiah's value.

Separately, Minister of Foreign Affairs Ali Alatas lamented
the leak of Camdessus' letter to the Washington Post.

"How could a letter from the IMF managing director find its
way to the mass media? That's unethical," he was quoted by Antara
as saying.

The minister expressed regret at the leak of what was
essentially a personal letter destined for a head of state.

Alatas declined to comment on the content of the letter but
said it was normal for outsiders to have different opinions about
Indonesia's economic policies.

"It's normal for people to have a different opinion. But if
they try to impose their policy, that's something else," he was
quoted as saying. (emb)