House, IMF in accord on economic reform program

JAKARTA (JP): The House of Representatives agreed on Saturday with the International Monetary Fund that the full implementation of the fund-sponsored economic reform program was crucial to revive confidence in the economy and to reach a sustainable economic recovery.

"We had a productive discussion ... we reached a broad agreement with the legislature about what needs to be done to transform the current recovery (process) into a sustainable one," visiting IMF Asia Pacific director Yusuke Horiguchi said during a media conference after closed-door talks with the legislators.

"Basically, a way to raise market confidence is to implement good policies that we have agreed to," Horiguchi added.

He said these policies covered macroeconomics, including prudent fiscal policy, fiscal decentralization and the reduction of the debt ratio to gross domestic product, the disposal of assets under the Indonesian Bank Restructuring Agency (IBRA) and the bank restructuring program.

"If these policies are fully implemented, market confidence will be enhanced," he said.

The head of House Commission IX for state budget and finance, Benny Pasaribu, agreed with Horiguchi. "Good policies and good implementation are very important."

"Economic recovery should be the priority," he added.

The IMF is providing a multibillion dollar bailout package to help finance the country's economic reform program.

But numerous factors, including political interference from the legislature, has led to the implementation of the IMF program being delayed several times. These delays have damaged investor confidence in the economy.

One such example was the recent postponement of the sale of publicly listed Bank Central Asia (BCA), the country's largest private bank which was nationalized in 1998. The delay, which was made based on the recommendation of the House, disappointed the IMF because the disposal of the bank is part of the key bank restructuring program.

The dialogue with the House, the first such meeting involving such a large number of legislators, including members of Commission IX, was aimed at reaching a common understanding about the fund's program in the country.

The dialogue began on Friday and lasted for seven hours, and was continued for another two hours on Saturday.

House Speaker Akbar Tandjung participated in the first day of discussions, while participants from the IMF included deputy director for Asia Pacific Anoop Singh and IMF Jakarta representative John Dodsworth.

In his speech at the opening of the meeting, Akbar explained the reasons behind the delay in the divestment of BCA shares.

Before this meeting, the IMF only met with a handful of top legislators during reviews of the fund-sponsored economic program.

The IMF held monthly reviews of the economic program up through September, after which the reviews were placed on a quarterly basis. The IMF will disburse its funds only after it completes the review and approves the government's upcoming economic program.

Asked if the House wanted a greater role in deciding the economic programs, Benny said: "It is important for the IMF to also talk to the legislature.

"Our Constitution and state guidelines stipulate that any agreement made by the government with a foreign institution should have the legislature's approval."

Benny also said the House would continue to criticize the government's economic programs if they lacked transparency, and if the government failed to implement what had been agreed to with the legislature.

"The current economic crisis is also due to the rubber-stamp legislatures in the past. We don't want history to repeat itself, so we'll continue to criticize," added fellow legislator Ekky Sjachruddin.

Legislator Theo Toemioen said he told the IMF during the meeting that its program had failed to stabilize the rupiah.

He said that in order to strengthen and stabilize the local unit there had to be some form of controls implemented, including banning the offshore trade of the rupiah.

The rupiah is currently at Rp 9,065 per U.S. dollar, its lowest level since July. The currency has been under strong pressure due to a combination of domestic political concerns and external influences, particularly the weakening of the Philippine peso. (rei)