IMF may allow CBS after reforms
IMF may allow CBS after reforms
SINGAPORE (AFP): The International Monetary Fund (IMF) may allow a currency board in Indonesia once reforms earlier mandated by the fund are implemented by the government, an official said yesterday.
David Nellor, deputy to the director of the IMF's Asia Pacific office, told AFP that the fund could incorporate the need for a currency board to manage the embattled rupiah under one of the IMF aid packages.
"There may be a follow-up to the package which would consist of the currency board," he said.
The IMF has pledged US$43 billion under various packages to Indonesia in exchange for a series of economic reforms to help the nation out of financial turmoil.
"But I think it is necessary (for Indonesia) to undertake a number of reforms and then at that stage one can see if the currency board will be viable," said Nellor, who spoke at an investment management forum here.
The reforms include an overhaul of the finance sector and a dismantling of monopolies and cartels.
A mission from the International Monetary Fund (IMF) arrived in Jakarta this week to begin its review of policies undertaken by the Indonesian government, which has sent confusing signals over the hotly-debated currency board proposal by the government to peg its currency to a fixed rate.
"There have been countries that operate currency boards that have active IMF programs," Nellor said, citing the IMF's presence in Argentina, Bulgaria and Estonia where currency boards exist.
On Wednesday, IMF research director Michael Mussa in Washington said he did not rule out the possibility that Indonesia at some time would be able to establish a currency board to stabilize the rupiah but stressed that "the chance for success at this stage is not great."
Like Mussa, Nellor said Indonesia's economic situation left much to be desired in terms of reforming the banking sector and strengthening its currency reserves.
"We just have to wait and see. These issues have to be addressed and the mission will discuss those and a broad range of policies," Nellor said, adding the mission would remain in Jakarta "as long as it takes."