IMF chief confirms threat to Indonesia over dollar peg
IMF chief confirms threat to Indonesia over dollar peg
BRUSSELS (AFP): The International Monetary Fund has warned
Indonesian that its 43-billion-dollar bailout of the country
could be jeopardized by its plan to peg the rupiah to the dollar,
IMF Managing Director Michel Camdessus said here yesterday.
After meeting with EU finance ministers, Camdessus confirmed
he had written to President Soeharto last week spelling out the
organization's opposition to Indonesia's establishment of a
currency board.
"What I expressed to President Soeharto is that going to a
currency board without previous consultation with the IMF ...
would be a violation of our arrangement," he said.
"Second the risk this would entail for the success of the
program would be such that the risk was very high that the (IMF)
executive board, which has to review the program in early July,
would decide to interrupt the program and the financing of
Indonesia."
British Chancellor of the Exchequer Gordon Brown said the
IMF's view that a currency board would be "premature," had been
strongly backed by the EU finance ministers.
He hinted that Britain was planning a new initiative aimed at
alleviating some of the social impact of the Indonesian crisis.
Reuters reported earlier on the day that the European finance
ministers would discuss the Indonesian currency proposal.
"I expect we will talk about it over lunch," Dutch Finance
Minister Gerrit Zalm told reporters when asked whether the
controversial currency board plan would be discussed at the
ministers' one day meeting in Brussels.
"Indonesia is the only (Asian) country where the situation is
not very clear," European monetary affairs Commissioner Yves-
Thibault de Silguy said, stressing the EU believed the most
difficult part of the Asian crisis was now "behind us".
Indonesia looked set to press ahead with a proposal for a
fixed exchange rate system locking the rupiah into the dollar
despite the risk that it could undermine a $43 billion bailout
package put together by the International Monetary Fund.
The deputy secretary-general of the Indonesian Council, Fuad
Bawazier, was reported on Monday as saying the government was on
track to proceed with the plan despite growing international
pressure for it to be abandoned.