IMF delays credit disbursement to Indonesia
IMF delays credit disbursement to Indonesia
WASHINGTON (Dow Jones): The International Monetary Fund will delay credit disbursements to Indonesia until the terms of a $10.1 billion standby credit arrangement can be renegotiated, a senior IMF official said.
Stanley Fischer, first deputy IMF managing director, confirmed that civil unrest and a range of political uncertainties surrounding the Soeharto government will necessitate a delay in the previously planned disbursement on June 4 as "a practical matter."
"If yesterday was a bad day to be clear about what is going to happen (in Indonesia), today is a worse day," Fischer said.
He added, "It's clear that we won't be able to move ahead (with further disbursements) until the political situation clarifies. That's the basic situation."
Fischer, who acknowledged the IMF isn't certain when it will be in a position to resume credit outlays, stressed that given the depth of the rupiah's decline in recent days, and the impact on a host of macroeconomic assumptions embodied in the IMF program, it is "very likely" that terms of the program will have to be revamped.
The senior IMF official underlined the importance of political stability in Indonesia, noting that the IMF needs a "reasonable" political system with which to work. And while Fischer wouldn't be drawn into details on sensitive political issues, he acknowledged that if Indonesian authorities were to choose a hard line crackdown, further IMF aid would be unlikely.
Fischer pointed to the IMF's 24-member executive board as the political compass of the institution. And he noted the likelihood that an Indonesia government crackdown on political dissent would be met with opposition on the fund board.
As for the IMF program, Fischer said revisions to macroeconomic assumptions could be limited if political stability is quickly restored, and investor confidence boosts the rupiah from current low levels. However, Fischer suggested that the IMF remains skeptical about prospects for a rapid rebound in investor confidence.
"I don't think there's any question that the Indonesian economy will be set back by what has happened," Fischer said. "How far? We can't tell."
An IMF mission was scheduled to visit Jakarta last week to begin the review process necessary for a $1 billion credit outlay on June 4. But the mission was held because of mounting civil unrest.
Total IMF outlays to Indonesia are $4 billion. Additionally, bilateral assistance to Indonesia has been slightly less than that amount, which translates into disbursement of less than a quarter of a $43 billion aid package pledged to Indonesia.
Once the IMF can send a mission to Indonesia, Fischer said that structural economic reform goals embodied in the current economic program still will remain key to any revised program. The senior official said that "I can't imagine" structural reforms would be dropped by the IMF.
"Any new, meaningful program for Indonesia would have the same structural reforms," agreed Hubert Neiss, the IMF's regional director.
Fischer, in turn, suggested that spill over from Indonesian, or market contagion, has been limited in Asia, and elsewhere.
The senior IMF official said that South Korea and Thailand, which are the other major IMF program nations, "have not been very affected."
"As far as the program in Korea and Thailand go, those programs are on track," Fischer said. He noted that "cooperation is very good" and the governments "are very serious." And he insisted that "I don't see much feedback" from Indonesia in Korea and Thailand.
Is there danger that IMF mandates in Indonesia will feed into broader unrest and repercussions in Asia? "I think what happens in Korea will be driven by the Korea program and what happens in Thailand will be driven by the Thai program," Fischer replied.
Fischer said that if Indonesia sought to attain the same economic performance now as it has under its current program goals it would likely need additional external aid beyond the multi-billion-dollar package already pledged.
"I'm not sure they'll get more money," Fischer said, noting questions about Indonesia's commitment to economic reforms, and the uncertainties surrounding the politics within the nation.