IMF focuses on budget, monetary policy review

JAKARTA (JP): The International Monetary Fund (IMF) technical team here to review Indonesia's macroeconomic development is focusing on the country's budget and monetary policy, IMF Asia Pacific director Hubert Neiss said yesterday.

He added, to the media after meeting the country's economic ministers, that the other two topics were financial restructuring and structural reforms.

"I will stay for two to three weeks... That's a normal length and we want to do a good job," he said.

He declined to make further comments, pointing out that it would be irresponsible to make any judgment before the review was completed.

Neiss, who arrived in Jakarta Wednesday afternoon, is here to review Indonesia's sweeping economic reform programs agreed with the IMF in April.

The review has to be completed before the IMF board of directors makes its decision on the disbursement of a second US$1 billion bailout tranche for Indonesia, which was delayed following the social and political unrest last month.

Neiss said on his arrival that the second $1 billion tranche would be disbursed in July.

The IMF has said that the macroeconomic assumptions used in Indonesia's April budget would have to be revised because the economic situation has further deteriorated following the recent political turmoil which scared many businesses and investors.

The April budget predicted 1998 economic growth at minus 5 percent, inflation of 45 percent, and an exchange rate of Rp 6,000 to the U.S. dollar at year-end.

Economists forecast that this year's economic contraction will be more than 10 percent and that inflation will surpass 100 percent.

The year-end target of Rp 6,000 to the dollar is also considered unrealistic; yesterday the currency plunged to Rp 15,000.

The IMF has championed a high-interest-rates policy to defend the beleaguered rupiah and curb inflation.

"There will be new calculations," Chairman of the National Development Planning Board (Bappenas) Budiono said yesterday.

He said that in addition to the budget, the discussions with the IMF would also focus on the country's social safety net program to help ease the burden of low-income people badly hit by the current crisis.

"I will fight to get more funding for this," he said, adding that structural reform would not be a major topic as the country had implemented most of the measures demanded.

The IMF has a commitment to provide $10 billion, which is part of a $43 billion bailout the Fund organized. Indonesia has so far received $4 billion from the IMF.

The reform program and the bailout money are expected to help lift the country from its worst ever economic crisis in three decades. The meltdown was prompted by the currency crisis which started in July. (rei)