IMF head hopes Indonesia avoids return to chaos
IMF head hopes Indonesia avoids return to chaos
TOKYO (Reuters): Expressing concern about conditions in Indonesia, IMF Managing Director Horst Koehler urged Jakarta in an interview published on Thursday to implement a raft of policy changes to boost confidence in its shattered economy.
Koehler, speaking in Singapore to the local Business Times newspaper and to the International Herald Tribune (IHT), said the Indonesian government needed to be more decisive in its efforts to tackle a situation he described as very difficult and complex.
"The IMF will stay engaged in Indonesia if they want us to stay engaged," the IHT quoted Koehler as saying. "We still have to hope that order comes and that it will not fall back into chaos."
His comments were a measure of the tense relations between the International Monetary Fund (IMF) and Indonesia, which is still struggling with the legacy of a financial crisis in 1997 that devastated its economy and its banking system.
The IMF has provided a series of loans to help Jakarta back on its feet, but last month it withheld a US$400 million installment of a $5 billion credit line after the government failed to implement a number of agreed economic reforms.
The IHT said Fund officials would hold talks with the government in Jakarta on Friday to try to unblock the loan, but Chief Economics Minister Rizal Ramli said no meeting was planned.
"A team will be here, maybe in end of January or early February," Ramli told Reuters in Jakarta. He said he had recently exchanged views with Koehler but declined to go into detail.
One of the sticking points concerns the impact of controversial new regional autonomy laws that Indonesia is implementing to help calm separatist tension and animosity over Jakarta's grip on the state's coffers.
Ramli on Tuesday chided the IMF for making a fuss over an issue on which it had previously kept silent.
Some analysts and businessmen have criticized the hastily prepared autonomy laws, fearing they may add to Indonesia's instability and create new layers of bureaucracy and corruption across Indonesia's 30 provinces and more than 300 districts.
The Business Times quoted Koehler as saying decentralization should be managed in such a way that Indonesia's budget does not get out of control.
He also called on the government to accept the need for an independent central bank, which he said would be "important for stabilizing the confidence of private markets".
The independence of the bank is guaranteed by law, but President Abdurrahman Wahid wants to replace the board because some of its members were linked to the discredited regime of former president Soeharto.
The Business Times said Koehler also urged the Indonesian Bank Restructuring Agency to speed up the recovery of assets and to take a tough line against recalcitrant corporate debtors.