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)