Thu, 25 May 2000

IMF comes under fire over RI reforms

JAKARTA (JP): The International Monetary Fund's far reaching involvement in the country's economic reform program is often counterproductive to the overall efforts in lifting Indonesia out of its worst ever crisis, economists have said.

An economist at the University of Indonesia, Anton Gunawan, said on Wednesday that the fund's negative judgment of the reform program, for example, often created more losses than benefits.

"The recent delay in the IMF's loan disbursement, for example, created greater losses rather than benefits because the loss in investors' confidence due to the delay not only hurt the market but the overall economic activities," he said in a seminar held by the Strategic Intelligence business consulting firm.

Anton regretted that the government failed to convince the IMF that the country should not be confined to a tight schedule in completing a certain set of reform programs in a situation where social and political changes were still happening as a result of the democratization process.

In a situation where so many things were changing, it was normal that the decision making process slowed down, thus delaying the completion of some parts of the restructuring programs, according to Anton.

Anton said the IMF should resist from being too involved in deciding the exact timeframe for all areas of the Indonesian reform programs.

"It is now post crisis time for Indonesia, and the task of the IMF is over," he said, adding that the main task of the fund to improve the balance of payments was no longer relevant.

The improvement in the country's balance of payments over the past number of months, with a turnaround from a deficit to a surplus current account, indicated that the Indonesian economy had passed the stage of emergency.

The country has booked an ample increase in exports, with imports also beginning to rise. In addition, the sovereign debt restructuring had also given a positive impact to the current account, according to Anton.

He acknowledged that the capital account, however, did not show as good a picture as the current account did.

"A huge amount of capital flowed out of the country in the past, and not much of it has come back in. But it is not the task of the IMF to bring back all that capital."

Anton said that the responsibility to lure back the funds laid on the shoulders of the government and those in the circle of elite politics.

He, however, pointed out that the political will of the government and other members of the political elite should be much greater than what it was now in order to enable the country to reach a smooth process of restructuring.

"Restructuring programs have to be carried out with or without the IMF," he said.

"With continuing bilateral support and political will in place, Indonesia should continue its restructuring programs without the IMF," he added.

Indonesia availed of the IMF's loan bail-out program in early 1998 to help cure the country's battered economy after being affected by the then Asian economic crisis.

Speaking at the seminar, noted economist Mari Pangestu said that the Indonesian government had no choice but to be consistent with the IMF-sponsored reform program.

The poor coordination of the Indonesian government in having a clear economic direction was another reason why the reform programs were still extremely important to this country, Mari added.

"How the IMF restructuring programs are implemented by Indonesia is used as a measure by the market to arrive upon what level of confidence people should have in Indonesia," Mari said.

The current policy makers were not giving enough commitment to the IMF restructuring programs, however, because they had a rather weak sense of ownership of such programs, according to Mari.

"A stronger commitment and a better outcome is possible when the policies are designed and carried out by the same parties, but this should still not prompt Indonesia to ditch the IMF," she added. (udi)