IMF, foreign donors urged to quickly disburse loans
IMF, foreign donors urged to quickly disburse loans
JAKARTA (JP): Economists welcomed yesterday Indonesia's new
accord with the International Monetary Fund (IMF) and urged the
agency and other donors to quickly disburse their pledged loans
to the country to prevent costlier crisis-saving measures.
"The loans have to be disbursed quickly or the bailout efforts
will be fruitless," said Umar Juoro, a senior economist at the
Center for Information and Development Studies (CIDES).
He predicted that the financial markets would react positively
when the IMF and other donor institutions, including the Asian
Development Bank and the World Bank, realized their loan
commitments.
The market's response to the new IMF deal was cool yesterday
because it had already been discounted, he added.
The rupiah stayed at Rp 14,800 to the U.S. dollar yesterday, a
depreciation of about 80 percent from its value last July.
"There was nothing new. The market has anticipated it," said
Goei Siauw Hong, head of research at SG Securities Indonesia,
commenting on the market's cool reaction to the new IMF accord.
The government announced yesterday a new memorandum of
economic and financial policies signed with the IMF Wednesday
afternoon. The deal, the third revision of the reform program
signed with the IMF in October last year, calls for a larger
subsidy allocation in the state budget and an accelerated effort
to restructure the country's ailing banking sector.
Indonesia sought the IMF's financial and technical assistance
last year to help lift the country from its worst-ever economic
crisis due to the sharp drop in the rupiah against the U.S.
dollar.
The Fund has a commitment to provide $10 billion in a balance-
of-payment loan as part of the US$43 billion bailout fund to help
lift the country out of its crisis.
The Fund, which had disbursed $4 billion, was initially
scheduled to extend another $1 billion earlier this month, but
delayed it due to the political unrest in May.
The economic assumptions in the new IMF accord have also been
revised. The economy is now projected to shrink around 10 percent
this year, annual inflation to reach 80 percent, the rupiah to
stabilize at about Rp 10,000 to the dollar by the last quarter of
1998, and the budget deficit for the 1998/1999 fiscal year to
jump to 8.5 percent of gross domestic product.
"The new macroeconomic assumptions indicate that our economic
outlook is gloomy," Umar said.
Former central bank director I Nyoman Moena also urged the IMF
and other donor institutions to immediately extend their loan
commitments to help stabilize the rupiah.
The stabilization of the rupiah is considered key to solving
problems like the huge budget deficit, banking restructuring, and
government and private sector overseas debts, he said.
"The immediate disbursement of the aid commitments will be key
to stabilizing the rupiah."
He added, however, that the $1 billion tranche to be disbursed
by the IMF was no longer enough because the economy had plunged
deeper into recession than was predicted when the last deal was
made.
"That amount would have been enough if it was disbursed two
months ago," he said.
He said the IMF should provide the country with at least $3
billion in the up-coming disbursement, as initially agreed with
the Fund in October. This was slashed to $1 billion when ex-
president Soeharto backtracked from the agreed economic reform
programs.
Nahdlatul Ulama (NU) chairman Abdurrahman Wahid said there
should not be any grounds for Indonesians not to support the
latest agreement.
"I call on Indonesians to support the agreement and President
B.J. Habibie's effort to bring an end to the economic crisis,
despite all our political differences," he said following a
meeting with the IMF's Asia Pacific director Hubert Neiss.
Neiss paid a visit to Abdurrahman's residence yesterday to
seek the NU chairman's views on the IMF-sponsored reform program.
The IMF director was accompanied by IMF senior resident
representative Kadhim Al-Eyd. (rei/aly/imn)