IMF, Indonesia near settlement

Thu, 30 Oct 1997, 00:00 WIB | Source: REUTERS

WASHINGTON (Reuters): IMF First Deputy Managing Director
Stanley Fischer said the IMF was close to sealing a loan
arrangement with Indonesia, the latest of the one-time Asian
"Tiger economies" to turn to the fund for help.

The International Monetary Fund is ready to help countries hit
by this week's meltdown of emerging market stocks, but will
insist on tough economic policies in return, Fischer told a
seminar on Tuesday.

He said Thailand, which won a US$17.2 billion international
loan package in August, needed to do more to convince financial
markets that it was serious about reforms.

"We stand ready to do our duty, which is to stabilize
economies that may need financial assistance, provided they are
willing to undertake appropriately ambitious economic reform and
adjustment programs," he said.

Fischer said Hong Kong had made the right decision with its
staunch defense of the currency peg.

"A lot of the economic structure in Hong Kong is built on this
exchange rate peg and they have the will, the ability and the
defenses to defend it," he said.

The loan package for Thailand was the biggest deal since the
international community made almost $50 billion available to
Mexico in 1995.

Fischer said the policies underpinning the loan were sound,
but Thailand needed to convince markets that painful new rules on
financial markets would be implemented.

"Thailand has to show it will follow through," he said. "The
measures themselves are very good, the implementation has to be
demonstrated."

There have been few clear indications about the size of an IMF
loan for Indonesia. But President Soeharto said on Tuesday that
Singapore was ready to make $10 billion available to support the
rupiah currency and restore market confidence.

In a related issue, an IMF spokesman said Singapore, which is
ready to offer Indonesia $10 billion to restore confidence in the
economy, backs the goals contained in an IMF program under
discussion for Jakarta.

"Singapore fully supports the goals of Indonesia's IMF-
supported program under discussion. Negotiations on Indonesia's
program are expected to be completed in the next few days," the
spokesman said.

The spokesman said the IMF had been fully briefed on
Singapore's intentions and was in touch with the authorities
there and in Indonesia.

Meanwhile, Singapore Prime Minister Goh Chok Tong said in
Copenhagen yesterday the amount and conditions of an aid package
to Indonesia were still being worked out but should be announced
shortly.

"We offered a line of credit amounting to $5.0 billion to
Indonesia, subject to certain terms, and also that if further
assistance is required, we will give her the assistance," he told
a news conference during a visit to Denmark.

"The matter is being sorted out by the ministries of finance
of both countries. I believe they'll be meeting over the next one
or two days' time, and you'll get a clearer picture."

Goh said that his country's help was conditional on the IMF
effort but did not say if it was an integral part.

"The assistance, of course is conditional on the assessment
that there will be a strong IMF package which Indonesia can agree
to because without the IMF package, the assistance of Singapore,
five billion, ten billion dollars, will not amount to very much,"
he said.

"There should be some agreement between Indonesia and the IMF
on what Indonesia should do regarding its own economy," Goh
added.

Indonesia sought help from the IMF earlier this month in an
effort to boost confidence after the rupiah currency crashed and
officials have been saying for days that negotiations are nearing
completion.