IMF exit policy must be acceptable to market: Experts

IMF exit policy must be acceptable to market: Experts

The Jakarta Post, Jakarta

The government must prepare a credible economic reform program if
it wants the country to graduate from the current International
Monetary Fund program successfully, according to experts.

The experts said credibility was crucial to maintaining the
support of the people and the international community for the
country's fragile economy.

"The main concern is market acceptability," Thailand's former
finance minister Tarin Niimmahaerni, who helped his country
successfully graduate from the IMF in 2000, said during a seminar
here.

Thailand was the first country in the region to be hit by the
devastating 1997 financial crisis, which forced its government to
adopt a tough IMF economic bailout program. The country has now
begun to enjoy stronger economic growth, as reflected in its
higher than expected first quarter growth of 6.7 percent from the
same period last year.

The seminar, jointly held by Bank Indonesia, the Indonesian
Economists Association (ISEI) and the University of Indonesia's
Institute for Economic and Social Research, was partly aimed at
gathering advice and input as the government explores various
exit strategies for when the IMF program ends in November.

Besides Niimmahaerni, other prominent speakers at the seminar
included the special adviser to the IMF's managing director, Jack
Boorman, the former deputy governor of Australia's Federal
Reserve Bank, Stephen Grenville, World Bank country director for
Indonesia Andrew Steer, former coordinating minister for the
economy Rizal Ramli and Bank Indonesia senior deputy governor
Anwar Nasution.

These speakers will also attend an ISEI seminar next week in
Malang, East Java, to discuss the same topic.

Grenville said that to help ensure a smooth transition after
the IMF program ends, the government must set up a favorable
environment. This will include establishing a "home-grown"
economic program that reflects a strong commitment to continuing
the current reform drive.

He said the market must view this home-grown program as an
"anchor policy".

The government is expected to unveil its exit strategy from
the IMF program next month, when it presents the 2004 state
budget draft. Over the past several months there has been intense
debate over what strategy the government should take.

One camp, whose leaders include Rizal Ramli, is demanding the
government end the monitoring role of the IMF.

There are also calls for the government to allow the IMF to
continue monitoring the government's economic reform program,
giving the country access to IMF money if needed. This is similar
to the exit strategy adopted by Thailand.

The IMF's continued monitoring role would be expected to
instill confidence in the government's reform program,
particularly ahead of the 2004 elections, when the government
could be tempted to implement popular economic measures instead
of tough reforms as the political pressure intensified.

Boorman said that in this type of situation, it was crucial
for the country to maintain a healthy foreign exchange reserves
level, which would be possible if the government opted for the
Thailand exit strategy model.

If it does not extend the current IMF program, the government
also will face a serious financing gap as the country will no
longer be eligible for the debt rescheduling facility from the
Paris Club of creditor nations.