IMF focuses on budget, monetary policy review

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)