IMF confident reform to succeed
JAKARTA (JP): An International Monetary Fund (IMF) senior official said here yesterday he believed the new banking reforms would help restore confidence in the country's battered economy.
IMF Asia-Pacific deputy director Bijan B. Aghevli said the troubled rupiah had quickly strengthened after the announcement of the reforms Tuesday and that the international financial markets also responded positively to the decisive measures.
The rupiah strengthened to 11,000 to the U.S. dollar Tuesday from 14,000 Monday following the announcement of the new banking reforms and the "voluntarily" freeze of the servicing of corporate foreign debt.
The rupiah gained yesterday, climbing to 9,850 to the greenback while the Jakarta Stock Exchange (JSX) composite index rose about 2 percent in moderate trading.
"As the government continues to put concrete measures in place, people will see specific implementations of the long list of indeed very impressive structural reforms as they begin to be implemented," Aghevli said after meeting with President Soeharto at his private residence on Jl. Cendana, Central Jakarta.
During the meeting, Aghevli was accompanied by P.R. Narvekar, a newly appointed IMF advisor to Soeharto. Soeharto was accompanied by top economic advisor Widjojo Nitisastro and Minister/State Secretary Moerdiono.
"The market has become more and more confident that something serious is being done," Aghevli remarked.
Minister of Finance Mar'ie Muhammad announced Tuesday that the government would stand behind the country's commercial banks and guarantee all depositors and creditors of all locally incorporated banks.
The government also established a new independent institution, the Indonesian Bank Restructuring Agency, to take over banks in financial trouble.
Aghevli also applauded the government's proposal for a temporary delay in servicing Indonesia's huge corporate debt.
"The fact is the corporate sector is having a lot of difficulties and most of the debt is not being serviced. In this process it is unavoidable to have a pause period where people are talking to each other," Agheveli said.
The corporate debt, estimated to be US$66 billion at the end of last year, of which $10 billion is due in March, has been seen as the main reason for the rupiah's continuous fall.
At least 228 companies have declared their inability to service their obligations.
The chairman of the government-appointed team to tackle the debt, Radius Prawiro, said Tuesday his team sought a voluntarily, temporary freeze on the servicing of the interest and principal of corporate debt.
He proposed that both creditors and debtors jointly find an acceptable solution to the debt repayment schedule.
In Washington, IMF managing director Michel Camdessus, the organizer of a $43 billion bailout package for Indonesia, praised the efforts to unravel the country's tangled web of private sector debt.
"It is my conviction that the new measures will be implemented effectively and will contribute to a resolution of Indonesia's present crisis," Camdessus said in a statement.
U.S. Treasury Secretary Robert Rubin welcomed the moves. "We welcome the steps taken by the Indonesian government in the last several days," Reuters quoted him as saying in Washington yesterday.
"The latest announcements from Indonesia are a very strong step forward," said Jean-Michel Severino, World Bank vice president for the East Asia and Pacific region. (prb)
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