IMF, Indonesia near settlement

Thu, 30 Oct 1997 | 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.