'IMF may impose few conditions'

JAKARTA (JP): The International Monetary Fund (IMF) should not impose many conditions on Indonesia in return for financial help to bail it out of the monetary crisis as it had done well in managing its economy, Minister/State Secretary Moerdiono said yesterday.

But economists and analysts warned that financial assistance from the IMF usually came with tough conditions attached to it and Indonesia could have trouble coping with them.

"So far we've done our homework well. If we do our homework well, there should be no conditions attached," Moerdiono said after accompanying President Soeharto in a meeting with Malaysian King Ja'afar Abdul Rahman.

"Just like a company that wants to borrow money from a bank, if the company has done well, the bank will not request too many conditions," he added.

Soeharto decided on Wednesday to sound out long-term support funds from international financial institutions, including the IMF, to tackle the monetary crisis.

And Moerdiono echoed yesterday Minister of Finance Mar'ie Muhammad, who announced the decision, saying that IMF assistance was only a precautionary measure to help overcome the crisis.

IMF managing director Michel Camdessus said Wednesday in Washington that his organization would support Indonesia's decision to put in place a new economic program in response to a decline in the Indonesian rupiah.

"The IMF strongly supports the approach that has been followed by Indonesia, which sees this as an occasion to strengthen its economic policies even if fundamentals are basically sound," Camdessus said in a statement.

Camdessus said two teams would arrive in Jakarta this week to begin discussions on an IMF-supported economic program and to provide technical assistance for financial sector reform.

The World Bank also welcomed the government's initiative to seek international support funds to stabilize its currency and economy.

"Indonesia has made a wise and intelligent move to seek funds from the IMF," the World Bank's country director for Indonesia Dennis de Tray said yesterday.

"The rupiah's free fall over the past few weeks was triggered by factors that we do not fully understand, which is why Indonesia turned to the IMF," he added.

The rupiah, along with other regional currencies, has been under speculative attack since the de facto devaluation of the Thai baht on July 2. Since then, the rupiah has lost about 35 percent of its value.

De Tray said there was a pressing need to rebuild Indonesia's foreign exchange market which was very thin because there were no dollars coming in.

Bank Indonesia governor J. Soedradjad Djiwandono revealed Wednesday that the size of Indonesia's foreign exchange market was halved from US$10 billion a day before the crisis to about $5 billion to $6 billion now.

De Tray said the currency crisis in Indonesia had turned into a confidence crisis, and thus it needed another approach to handle it.

"What we need to do is put together a package that is so good that we can say to the world, financing will not be a problem," he said.

De Tray said the essence of the IMF program was to help the Indonesia government strengthen or even accelerate economic development in the country.

Former cabinet minister Moh. Sadli hailed the government move, but warned that the government must be prepared to take a bitter pill from conditions tied to the IMF aid package.

"Well, we have to sacrifice, accepting all possible conditions to restore confidence, shore up the rupiah and attract foreign funds which have left Indonesia to reenter the country," Sadli said.

He said Indonesia was actually not in dire need of IMF help yet because its fundamentals were much stronger than the Philippines and Thailand which had already sought IMF help.

The country had enough foreign exchange reserves to fund five months of imports and had substantial standby loans which could be withdrawn any time, Sadli said.

"Anyway, it was a good move as it was taken before the crisis became too critical," he said.

He also praised Soeharto's decision to reappoint veteran bureaucrat Widjojo Nitisastro to coordinate efforts to help restore confidence in the country's economy and currency.

Widjojo is among those credited for Indonesia's climb out of an economic abyss of near bankruptcy and chaos in the mid-1960s to become one of the world's fastest growing economies.

He retired from the cabinet in 1983 but has since been active behind the scenes in formulating economic policy. (prb/aly/rid)

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