IMF confident reform to succeed

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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